Models for comparative institutional analysis

• Main Author: Yamada, Tomoki
• Published: University of East Anglia 2008
• Subjects: 302.35015193
• Online Access: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.446507

We propose studies of institutions in the framework of game theory. Institutions can be interpreted as equilibria because equilibrium strategies are self-enforceable and regulate individuals' behaviour. First, we examine whether social interactions can be modelled as a game or not. We collect the data by observing drivers' yielding to one another at a narrow part of a road. The empirical analysis shows that vehicles' behaviour is interpreted in two ways. One is a correlated strategy and the other is signalling. For both cases, equilibria were significantly estimated and institution was confirmed. We conclude these behaviours complement to each other. Next, we model formation of an unspoken rule as an evolutionary game. There is a riverbank that has a road on top along a river. The road is narrow for vehicles so that a rule for passing in opposite direction has evolved. The stochastic differential equation system is solved numerically and its graph shows how the rule is formed by individuals' strategic behaviour. Then, we model vegetable brokerage in rural Indonesia as a random matching repeated game. Peasants and middlemen sign contracts to buy and sell vegetables. But both the peasants and the middlemen have an incentive to breach the contracts. Players who commit fraud are ostracized as punishment and the importance of information carrying and a role of a community are shown. An evolutionary game model does not describe each individual's behaviour. A repeated game model assumes individuals are rational so that it cannot deal with the problem of equilibrium selection. We develop a model in the framework of agentbased- computational economics to propose a solution to these problems. Individuals recurrently play extensive form games of which constituent game is a random matching coordination game and they come to share beliefs about an equilibrium action