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Institutional Inertia and Institutional Change in an Expanding Normal-Form Game

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  • Torsten Heinrich

    (Institute of Institutional and Innovation Economics, University of Bremen, Hochschulring 4,28359 Bremen, Germany)

  • Henning Schwardt

    (Institute of Institutional and Innovation Economics, University of Bremen, Hochschulring 4,28359 Bremen, Germany)

Abstract

We investigate aspects of institutional change in an evolutionary game-theoretic framework, in principle focusing on problems of coordination in groups when new solutions to a problem become available. In an evolutionary game with an underlying dilemma structure, we let a number of new strategies become gradually available to the agents. The dilemma structure of the situation is not changed by these. Older strategies offer a lesser payoff than newly available ones. The problem that agents have to solve for realizing improved results is, therefore, to coordinate on newly available strategies. Strategies are taken to represent institutions; the coordination on a new strategy by agents, hence, represents a change in the institutional framework of a group. The simulations we run show a stable pattern regarding such institutional changes. A number of institutions are found to coexist, with the specific number depending on the relation of payoffs achievable through the coordination of different strategies. Usually, the strategies leading to the highest possible payoff are not among these. This can be taken to reflect the heterogeneity of rules in larger groups, with different subgroups showing different behavior patterns.

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  • Torsten Heinrich & Henning Schwardt, 2013. "Institutional Inertia and Institutional Change in an Expanding Normal-Form Game," Games, MDPI, vol. 4(3), pages 1-28, August.
    • Handle: RePEc:gam:jgames:v:4:y:2013:i:3:p:398-425:d:27915
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    2. Christian Cordes & Wolfram Elsner & Claudius Graebner & Torsten Heinrich & Joshua Henkel & Henning Schwardt & Georg Schwesinger & Tong-Yaa Su, 2021. "The collapse of cooperation: the endogeneity of institutional break-up and its asymmetry with emergence," Journal of Evolutionary Economics, Springer, vol. 31(4), pages 1291-1315, September.
    3. Elsner, Wolfram & Schwardt, Henning, 2015. "The (dis-)embedded firm: Complex structure and dynamics in inter-firm relations. Adding institutionalization as a Veblenian dimension to the Coase-Williamson approach – An emerging triangular organiza," MPRA Paper 67193, University Library of Munich, Germany.
    4. Heinrich, Torsten, 2016. "The Narrow and the Broad Approach to Evolutionary Modeling in Economics," MPRA Paper 75797, University Library of Munich, Germany.
    5. Tassos Patokos, 2014. "Introducing Disappointment Dynamics and Comparing Behaviors in Evolutionary Games: Some Simulation Results," Games, MDPI, vol. 5(1), pages 1-25, January.
    6. Wolfram Elsner, 2019. "Policy and state in complexity economics," Chapters, in: Nikolaos Karagiannis & John E. King (ed.), A Modern Guide to State Intervention, chapter 1, pages 13-48, Edward Elgar Publishing.

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