The Economics of Convention
The purpose of conventions is to coordinate people's expectations in economic and social interactions that have multiple equilibria. Conventions often emerge endogenously from the accumulation of many precedents, a process that can be modeled as a stochastic dynamical system. The theory leads to specific predictions about the ways in which conventions form and are displaced, and identifies key properties of conventions that are most likely to withstand the test of time. The theory is illustrated by the evolution of left-wing driving conventions in Europe and patterns of sharecropping contracts in agriculture.
Volume (Year): 10 (1996)
Issue (Month): 2 (Spring)
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References listed on IDEAS
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- Joseph E. Stiglitz, 1974.
"Incentives and Risk Sharing in Sharecropping,"
Review of Economic Studies,
Oxford University Press, vol. 41(2), pages 219-255.
- Joseph E. Stiglitz, 1973. "Incentives and Risk-Sharing in Sharecropping," Cowles Foundation Discussion Papers 353, Cowles Foundation for Research in Economics, Yale University.
- Ellison, Glenn, 1993. "Learning, Local Interaction, and Coordination," Econometrica, Econometric Society, vol. 61(5), pages 1047-1071, September.
- Glen Ellison, 2010. "Learning, Local Interaction, and Coordination," Levine's Working Paper Archive 391, David K. Levine.
- David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, vol. 75(2), pages 332-337, May.
- Samuelson Larry, 1994. "Stochastic Stability in Games with Alternative Best Replies," Journal of Economic Theory, Elsevier, vol. 64(1), pages 35-65, October.
- Brian Arthur, W. & Ermoliev, Yu. M. & Kaniovski, Yu. M., 1987. "Path-dependent processes and the emergence of macro-structure," European Journal of Operational Research, Elsevier, vol. 30(3), pages 294-303, June.
- An, Mark Y. & Kiefer, Nicholas M., 1995. "Evolution and Equilibria Selection of Repeated Lattice Games," Working Papers 95-32, Duke University, Department of Economics.
- Anderlini, L. & Ianni, A., 1996. "Learning on a Torus," Discussion Paper Series In Economics And Econometrics 9611, Economics Division, School of Social Sciences, University of Southampton.
- Blume Lawrence E., 1993. "The Statistical Mechanics of Strategic Interaction," Games and Economic Behavior, Elsevier, vol. 5(3), pages 387-424, July.
- L. Blume, 2010. "The Statistical Mechanics of Strategic Interaction," Levine's Working Paper Archive 488, David K. Levine.
- Michael L. Katz & Carl Shapiro, 1994. "Systems Competition and Network Effects," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 93-115, Spring.
- Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
- Stanley M. Besen & Joseph Farrell, 1994. "Choosing How to Compete: Strategies and Tactics in Standardization," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 117-131, Spring. Full references (including those not matched with items on IDEAS)
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