Conventions and institutions in coordination problems

Fieke Van Der Lecq
1996 De Economist  
This survey article starts with a game-theoretic interpretation of coordination problems that occur in an economy. Three types of coordination 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. Coordination norms, such as conventions and institutions, may provide this information. The
more » ... rgence and persistence of coordination norms as well as the relationship between the type of coordination game and the type of coordination norm are discussed. After a discussion on conventions and rationality, some notions from New Institutional Economics are introduced, in which information and transaction costs are taken as explanations for the existence of institutions. Some applications are given in the last section.
doi:10.1007/bf01682834 fatcat:san37hhgzjc3zdsk7wrphnnune