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A Theory of Strategic Uncertainty and Cultural Diversity

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  • Willemien Kets
  • Alvaro Sandroni

Abstract

We identify a new mechanism through which cultural diversity affects economic outcomes, based on a model of culture as shared cognition. Under this view, cultural diversity matters because it increases strategic uncertainty. The model can help better understand a variety of disparate evidence, including why homogeneous societies can be more conformist, why diverse societies may get stuck in a low-trust trap, why companies with a strong culture may fail to adopt superior work practices, and why autocratic rulers in diverse societies may overinvest in state capacity.

Suggested Citation

  • Willemien Kets & Alvaro Sandroni, 2021. "A Theory of Strategic Uncertainty and Cultural Diversity," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(1), pages 287-333.
    • Handle: RePEc:oup:restud:v:88:y:2021:i:1:p:287-333.
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    File URL: http://hdl.handle.net/10.1093/restud/rdaa037
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    Cited by:

    1. Roweno J. R. K. Heijmans, 2023. "Unraveling Coordination Problems," Papers 2307.08557, arXiv.org, revised Aug 2023.
    2. repec:osf:socarx:ymzrd_v1 is not listed on IDEAS
    3. Kets, Willemien & Kager, Wouter & Sandroni, Alvaro, 2022. "The value of a coordination game," Journal of Economic Theory, Elsevier, vol. 201(C).
    4. Georgy Lukyanov & David Li, 2025. "Belief Diversity and Cooperation," Papers 2509.08851, arXiv.org.
    5. Lukyanov, Georgy & Li, David, 2025. "Belief diversity and cooperation," Journal of Economic Behavior & Organization, Elsevier, vol. 229(C).
    6. Li, David & Lukyanov, Georgy, 2025. "Intergroup cooperation and reputation for honesty in an OLG framework," TSE Working Papers 25-1687, Toulouse School of Economics (TSE).
    7. Baszczak, Łukasz, . "Ekonomia narracji – początki nowego nurtu," Gospodarka Narodowa-The Polish Journal of Economics, Szkoła Główna Handlowa w Warszawie / SGH Warsaw School of Economics, vol. 2023(1).
    8. Akerlof, Robert & Rayo, Luis, 2020. "Narratives and the Economics of the Family," CEPR Discussion Papers 15152, C.E.P.R. Discussion Papers.
    9. Kets, Willemien, 2021. "Organizational Design: Culture and Incentives," SocArXiv 3y8t4, Center for Open Science.
    10. Akerlof, Robert & Rayo, Luis, 2020. "Narratives and the Economics of the Family," The Warwick Economics Research Paper Series (TWERPS) 1299, University of Warwick, Department of Economics.
    11. Akerlof, Robert & Rayo, Luis, 2020. "Narratives and the Economics of the Family," CAGE Online Working Paper Series 503, Competitive Advantage in the Global Economy (CAGE).
    12. David Li & Georgy Lukyanov, 2025. "Honesty, Stigma, and Cooperation in an Overlapping-Generations Game," Papers 2509.04748, arXiv.org, revised Nov 2025.
    13. Jin, Ming & Chen, Fanglin & Chen, Zhongfei, 2023. "Cultural barriers in China's corporate loans," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).
    14. Łukasz Baszczak, 2023. "Ekonomia narracji – początki nowego nurtu," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 1, pages 66-81.
    15. Block, Juan I. & Dutta, Rohan & Levine, David K., 2025. "Leaders and social norms: On the emergence of consensus or conflict," Journal of Economic Behavior & Organization, Elsevier, vol. 233(C).
    16. Ductor, Lorenzo & Prummer, Anja, 2024. "Gender homophily, collaboration, and output," Journal of Economic Behavior & Organization, Elsevier, vol. 221(C), pages 477-492.

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