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A Re-Interpretation of the Concept of Nash Equilibrium Based on the Notion of Social Institutions

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  • Carmona, Guilherme

Abstract

We 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 Info

Paper provided by Universidade Nova de Lisboa, Faculdade de Economia in its series FEUNL Working Paper Series with number wp425.

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Length: 23 pages
Date of creation: 2003
Date of revision:
Handle: RePEc:unl:unlfep:wp425

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  1. Ehud Kalai, 1987. "Bounded Rationality and Strategic Complexity in Repeated Games," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 783, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Carmona, Guilherme, 2002. "On the Notion of Social Institutions," FEUNL Working Paper Series, Universidade Nova de Lisboa, Faculdade de Economia wp421, Universidade Nova de Lisboa, Faculdade de Economia.
  3. Ehud Kalai & William Stanford, 1986. "Finite Rationality and Interpersonal Complexity in Repeated Games," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 679, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. Green, Edward J., 1980. "Noncooperative price taking in large dynamic markets," Journal of Economic Theory, Elsevier, Elsevier, vol. 22(2), pages 155-182, April.
  5. Aumann, Robert & Brandenburger, Adam, 1995. "Epistemic Conditions for Nash Equilibrium," Econometrica, Econometric Society, Econometric Society, vol. 63(5), pages 1161-80, September.
  6. Banks, Jeffrey S. & Sundaram, Rangarajan K., 1990. "Repeated games, finite automata, and complexity," Games and Economic Behavior, Elsevier, Elsevier, vol. 2(2), pages 97-117, June.
  7. Okuno-Fujiwara Masahiro & Postlewaite Andrew, 1995. "Social Norms and Random Matching Games," Games and Economic Behavior, Elsevier, Elsevier, vol. 9(1), pages 79-109, April.
  8. Al-Najjar, Nabil I. & Smorodinsky, Rann, 2001. "Large Nonanonymous Repeated Games," Games and Economic Behavior, Elsevier, Elsevier, vol. 37(1), pages 26-39, October.
  9. Michi Kandori, 2010. "Social Norms and Community Enforcement," Levine's Working Paper Archive 630, David K. Levine.
  10. Piccione, Michele, 1992. "Finite automata equilibria with discounting," Journal of Economic Theory, Elsevier, Elsevier, vol. 56(1), pages 180-193, February.
  11. Lipman, Barton L. & Srivastava, Sanjay, 1990. "Informational requirements and strategic complexity in repeated games," Games and Economic Behavior, Elsevier, Elsevier, vol. 2(3), pages 273-290, September.
  12. Rubinstein, Ariel, 1979. "Equilibrium in supergames with the overtaking criterion," Journal of Economic Theory, Elsevier, Elsevier, vol. 21(1), pages 1-9, August.
  13. Sabourian, Hamid, 1990. "Anonymous repeated games with a large number of players and random outcomes," Journal of Economic Theory, Elsevier, Elsevier, vol. 51(1), pages 92-110, June.
  14. Barlo, Mehmet & Carmona, Guilherme, 2011. "Strategic behavior in non-atomic games," MPRA Paper 35549, University Library of Munich, Germany.
  15. Abreu, Dilip & Rubinstein, Ariel, 1988. "The Structure of Nash Equilibrium in Repeated Games with Finite Automata," Econometrica, Econometric Society, Econometric Society, vol. 56(6), pages 1259-81, November.
  16. Fudenberg, Drew & Maskin, Eric, 1986. "The Folk Theorem in Repeated Games with Discounting or with Incomplete Information," Econometrica, Econometric Society, Econometric Society, vol. 54(3), pages 533-54, May.
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