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The Emergence of Efficient Institutions and Social Interactions

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  • Dai, Shuanping

Abstract

Institutions are the equilibrium states of games, and the emergence of institutions is an evolutionary, stochastic, and (social) structural dependence process of interactions among agents. In this paper, we address the relationship between the institutional emergence and the structure of social interactions under the context of (network) coordination games. The model here shows when the agents are socially restricted, and individual decision-making is based on mutual agreements, inefficient institutions will be the stable states in the long run, say, institutions are locked-in inefficiently. When the agents are not restricted socially, the institutional stability will wander between two states. The efficient institutions can emerge only as the agents are facing strong cost constraints and, are in the contexts with relative high certainties, for instance, as the interactive population size is becoming smaller.

Suggested Citation

  • Dai, Shuanping, 2012. "The Emergence of Efficient Institutions and Social Interactions," MPRA Paper 47011, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:47011
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    File URL: https://mpra.ub.uni-muenchen.de/47011/1/MPRA_paper_47011.pdf
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    References listed on IDEAS

    as
    1. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384, January.
    2. Glenn Ellison, 2000. "Basins of Attraction, Long-Run Stochastic Stability, and the Speed of Step-by-Step Evolution," Review of Economic Studies, Oxford University Press, vol. 67(1), pages 17-45.
    3. Sanjeev Goyal, 2007. "Introduction to Connections: An Introduction to the Economics of Networks," Introductory Chapters,in: Connections: An Introduction to the Economics of Networks Princeton University Press.
    4. Kandori, Michihiro & Mailath, George J & Rob, Rafael, 1993. "Learning, Mutation, and Long Run Equilibria in Games," Econometrica, Econometric Society, vol. 61(1), pages 29-56, January.
    5. Harper, David A. & Endres, Anthony M., 2012. "The anatomy of emergence, with a focus upon capital formation," Journal of Economic Behavior & Organization, Elsevier, vol. 82(2), pages 352-367.
    6. repec:mes:jeciss:v:23:y:1989:i:1:p:189-213 is not listed on IDEAS
    7. André Orléan & Bernard Walliser & Jacques Lesourne, 2006. "Evolutionary Microeconomics," Post-Print halshs-00833255, HAL.
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    More about this item

    Keywords

    Institutional Emergence; Coordination Games; Stochastically Stable Equilibrium; Network Formation; Social Distance;

    JEL classification:

    • B15 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Historical; Institutional; Evolutionary
    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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