A Re-Interpretation of the Concept of Nash Equilibrium Based on the Notion of Social Institutions
AbstractWe define social institutions as strategies in some repeated game. With this interpretation in mind, we consider the impact of introducing requirements on strategies which have been viewed as necessary properties for any social institution to endure. The properties we study are finite complexity, symmetry, global stability, and semiperfection. We show that: (1) If a strategy satisfies these properties then players play a Nash equilibrium of the stage game in every period; (2) The set of finitely complex, symmetric, globally stable, semi-perfect equilibrium payoffs in the repeated game equals the set of Nash equilibria payoffs in the stage game; and (3) A strategy vector satisfies these properties in a Pareto optimal way if and only if players play some Pareto optimal Nash equilibrium of the stage game in every stage. These results provide a social institution interpretation of Nash equilibrium: individual behavior in enduring social institutions is described by Nash equilibria.
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Bibliographic InfoPaper provided by Universidade Nova de Lisboa, Faculdade de Economia in its series FEUNL Working Paper Series with number wp425.
Length: 23 pages
Date of creation: 2003
Date of revision:
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