The Formation of Common Norms on the Assumption of ‘Fundamentally’ Imperfect Information

Abstract

The role of social norms is to process ‘fundamentally’ imperfect information. Information about future events, often needed in economic activity, is inevitably imperfect, since there’s no way to check its correctness from our subjective viewpoint. The reason to be able to act well in spite of ‘fundamentally’ imperfect information is that we have social systems available to process and complement imperfect information. In this article, the problem of transferring information between agents is investigated with a multi-agent model. The model represents dual subjective interpretations of information by agents, information senders and receivers. Two types of norms emerge in the agents’ system. One is the norm between senders and receivers, and the other among receivers. The former facilitates clear communication between senders and receivers. On the other hand, the latter intervenes to form the former norms. The receivers decide their action by referring to others’ behaviour, so some clusters are formed. It is notable that the relationship between intervals of referring to others’ behaviour by receivers and the average size of clusters is a power. This means that even if the agents seldom refer to others, there is a possibility of clusters emerging. Economic implications of our model and results are discussed.