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Institutions, Frames, and Social Contract Reasoning

Author

Listed:
  • Virginia Cecchini Manara

    () (University of Trento)

  • Lorenzo Sacconi

    () (University of Milan)

Abstract

This work aims at filling a gap in the cognitive representation of institutions, starting from Aoki’s account of institutions as equilibria in a game- theoretical framework. We propose a formal model to explain what happens when different players hold different representations of the game they are playing. In particular, we assume that agents do not know all the feasible strategies they can play, because they have bounded rationality; grounding on the works by Johnson-Laird and his coauthors, we suggest that individuals use parsimonious mental models that make as little as possible explicit to represent the game they are playing, because of their limited capacity of working memory and attention. Second, we rely on Bacharach’s variable frame theory: agents transform the objective game into a framed game, where strategies are “labeled†in some sense. In such a context, we argue that a social contract – given its prescriptive and universalizable meaning – may provide a shared mental model, accepted by all players, that allows agents to select a joint plan of action corresponding to an efficient and fair distribution.

Suggested Citation

  • Virginia Cecchini Manara & Lorenzo Sacconi, 2019. "Institutions, Frames, and Social Contract Reasoning," Econometica Working Papers wp71, Econometica.
  • Handle: RePEc:ent:wpaper:wp71
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    References listed on IDEAS

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    1. Paola Manzini & Marco Mariotti, 2012. "Categorize Then Choose: Boundedly Rational Choice And Welfare," Journal of the European Economic Association, European Economic Association, vol. 10(5), pages 1141-1165, October.
    2. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
    3. Aoki, Masahiko, 2010. "Corporations in Evolving Diversity: Cognition, Governance, and Institutions," OUP Catalogue, Oxford University Press, number 9780199218530.
    4. Arthur T. Denzau & Douglass C. North, 1994. "Shared Mental Models: Ideologies and Institutions," Kyklos, Wiley Blackwell, vol. 47(1), pages 3-31, February.
    5. Costa-Gomes, Miguel & Crawford, Vincent P & Broseta, Bruno, 2001. "Cognition and Behavior in Normal-Form Games: An Experimental Study," Econometrica, Econometric Society, vol. 69(5), pages 1193-1235, September.
    6. Michael Bacharach, 2006. "The Hi-Lo Paradox, from Beyond Individual Choice: Teams and Frames in Game Theory," Introductory Chapters,in: Natalie Gold & Robert Sugden (ed.), Beyond Individual Choice: Teams and Frames in Game Theory Princeton University Press.
    7. V. P. Crawford., 2014. "Boundedly Rational versus Optimization-Based Models of Strategic Thinking and Learning in Games," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 5.
    8. Masahiko Aoki, 2013. "Institutions as cognitive media between strategic interactions and individual beliefs," Chapters,in: Comparative Institutional Analysis, chapter 17, pages 298-312 Edward Elgar Publishing.
    9. Roger Myerson & Jörgen Weibull, 2015. "Tenable Strategy Blocks and Settled Equilibria," Econometrica, Econometric Society, vol. 83(3), pages 943-976, May.
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    11. Edi Karni & Marie-Louise Vier?, 2013. ""Reverse Bayesianism": A Choice-Based Theory of Growing Awareness," American Economic Review, American Economic Association, vol. 103(7), pages 2790-2810, December.
    12. Kreps, David M., 1990. "Game Theory and Economic Modelling," OUP Catalogue, Oxford University Press, number 9780198283812.
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    Cited by:

    1. Virginia Cecchini Manara & Lorenzo Sacconi, 2019. "Compliance with socially responsible norms of behavior: reputation vs. conformity," Econometica Working Papers wp73, Econometica.

    More about this item

    Keywords

    social institutions; shared beliefs; mental models; framing; social contract;

    JEL classification:

    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary; Modern Monetary Theory;
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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