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When do Formal Rules and Informal Norms Converge?

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  • Desiree A. Desierto
  • John V. C. Nye

Abstract

We propose evolutionary dynamics to show how rules converge into norms. Individuals play a game of upholding or rejecting a rule, and the more they uphold the rule, the more it becomes established as a norm. We find that when individuals are rational, the initial state determines whether the rule converges into a norm; when individuals are boundedly rational, convergence occurs only if upholding rules is a risk-dominant strategy. This suggests why big-bang reforms that affect only the initial state can fail, while gradualist approaches that can sustain the risk dominance of upholding rules may be more effective.

Suggested Citation

  • Desiree A. Desierto & John V. C. Nye, 2011. "When do Formal Rules and Informal Norms Converge?," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 167(4), pages 613-629, December.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(201112)167:4_613:wdfrai_2.0.tx_2-i
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    References listed on IDEAS

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    Cited by:

    1. Vitaliy SERZHANOV & Fedir ABRAMOV & Volodymyr ANDRYSHYN, 2024. "The Influence Of Demonstrative Formal Rules On The Dynamics Of The Effectiveness Of Institutional Frameworks," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 19(2), pages 238-249, August.

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    More about this item

    JEL classification:

    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary; Modern Monetary Theory;

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