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Conventions and institutions in coordination problems

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Summary

This survey article starts with a game-theory interpretation of coordination problems that occur in an economy. Three types of games are discussed in which the degree of coordination versus conflict varies. It is shown that game-theoretic techniques for equilibrium selection or securing the highest pay-off outcome do not always suffice, which raises the need for exogenous information. Norms, such as conventions and institutions, may provide this information. The emergence and persistence of norms as well as the relationship between the type of game and the type of norm are discussed. After a discussion on conventions and rationality, some notions from Institutional Economics are introduced, in which institutions are explained as a way to deal with limited and costly information. Some applications are given in the last section.

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Authors and Affiliations

  1. Department of Economics, University of Groningen, PO Box 800, NL-9700 AV, Groningen, The Netherlands

    Fieke Van Der Lecq

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  1. Fieke Van Der Lecq
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The author gratefully acknowledges comments given by Simon Kuipers, Hans van Ees, Elma van de Mortel and an anonymous referee without implicating them in remaining errors.

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Van Der Lecq, F. Conventions and institutions in coordination problems. De Economist 144, 397–428 (1996). https://doi.org/10.1007/BF01682834

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