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

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  • Guilherme Carmona

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 semi-perfection. 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 EconWPA in its series Game Theory and Information with number 0311005.

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Length: 23 pages
Date of creation: 19 Nov 2003
Date of revision:
Handle: RePEc:wpa:wuwpga:0311005

Note: Type of Document - pdf; prepared on win xp; to print on general; pages: 23; figures: 0. none
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Web page: http://128.118.178.162

Related research

Keywords: Nash equilibrium; discounted repeated games; semi-perfect equilibrium; global stability; finite automata; social norms.;

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References

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  1. Guilherme Carmona, 2004. "On the Notion of Social Institutions," Game Theory and Information 0402005, EconWPA.
  2. Piccione, Michele, 1992. "Finite automata equilibria with discounting," Journal of Economic Theory, Elsevier, vol. 56(1), pages 180-193, February.
  3. Kalai, Ehud & Stanford, William, 1988. "Finite Rationality and Interpersonal Complexity in Repeated Games," Econometrica, Econometric Society, vol. 56(2), pages 397-410, March.
  4. Fudenberg, Drew & Maskin, Eric, 1986. "The Folk Theorem in Repeated Games with Discounting or with Incomplete Information," Econometrica, Econometric Society, vol. 54(3), pages 533-54, May.
  5. Sabourian, Hamid, 1990. "Anonymous repeated games with a large number of players and random outcomes," Journal of Economic Theory, Elsevier, vol. 51(1), pages 92-110, June.
  6. Michi Kandori, 2010. "Social Norms and Community Enforcement," Levine's Working Paper Archive 630, David K. Levine.
  7. Barlo, Mehmet & Carmona, Guilherme, 2011. "Strategic behavior in non-atomic games," MPRA Paper 35549, University Library of Munich, Germany.
  8. Lipman, Barton L. & Srivastava, Sanjay, 1990. "Informational requirements and strategic complexity in repeated games," Games and Economic Behavior, Elsevier, vol. 2(3), pages 273-290, September.
  9. Aumann, Robert & Brandenburger, Adam, 1995. "Epistemic Conditions for Nash Equilibrium," Econometrica, Econometric Society, vol. 63(5), pages 1161-80, September.
  10. Okuno-Fujiwara Masahiro & Postlewaite Andrew, 1995. "Social Norms and Random Matching Games," Games and Economic Behavior, Elsevier, vol. 9(1), pages 79-109, April.
  11. Banks, J.S. & Sundaram, R.K., 1989. "Repeated Games, Finite Automata, And Complexity," RCER Working Papers 183, University of Rochester - Center for Economic Research (RCER).
  12. Ehud Kalai, 1987. "Bounded Rationality and Strategic Complexity in Repeated Games," Discussion Papers 783, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  13. Rubinstein, Ariel, 1979. "Equilibrium in supergames with the overtaking criterion," Journal of Economic Theory, Elsevier, vol. 21(1), pages 1-9, August.
  14. Green, Edward J., 1980. "Noncooperative price taking in large dynamic markets," Journal of Economic Theory, Elsevier, vol. 22(2), pages 155-182, April.
  15. Al-Najjar, Nabil I. & Smorodinsky, Rann, 2001. "Large Nonanonymous Repeated Games," Games and Economic Behavior, Elsevier, vol. 37(1), pages 26-39, October.
  16. Abreu, Dilip & Rubinstein, Ariel, 1988. "The Structure of Nash Equilibrium in Repeated Games with Finite Automata," Econometrica, Econometric Society, vol. 56(6), pages 1259-81, November.
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