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Institutional Inertia and Institutional Change in an Expanding Normal-Form Game
Institute of Institutional and Innovation Economics, University of Bremen, Hochschulring 4,28359 Bremen, Germany
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Received: 4 June 2013; in revised form: 23 July 2013 / Accepted: 2 August 2013 / Published: 12 August 2013
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.
Keywords: institutional economics; Veblenian economics; evolutionary game theory; simulation; institutional change
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Heinrich, T.; Schwardt, H. Institutional Inertia and Institutional Change in an Expanding Normal-Form Game. Games 2013, 4, 398-425.
Heinrich T, Schwardt H. Institutional Inertia and Institutional Change in an Expanding Normal-Form Game. Games. 2013; 4(3):398-425.
Heinrich, Torsten; Schwardt, Henning. 2013. "Institutional Inertia and Institutional Change in an Expanding Normal-Form Game." Games 4, no. 3: 398-425.