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The Emergence of Institutions

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  • Sanchez-Pages, Santiago
  • Straub, Stéphane

Abstract

This paper analyses how institutions aimed at coordinating economic interactions may emerge. Starting from a hypothetical state of nature, agents can delegate the task of enforcing cooperation to one of them in exchange for a proper compensation. Both individual and collective commitment problems stand in the way of institution formation. These problems imply first that a potentially efficient institution may fail to emerge and also that if it emerges, it may do so inefficiently. We show that big and untrustworthy societies are more likely to support institutions whereas their emergence is more difficult in small and trusting societies, but if institutions do emerge, they tend to be more inefficient in the former type of societies. Finally, we show that the threat of secession by a subset of agents may alleviate the latter problem.
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Suggested Citation

  • Sanchez-Pages, Santiago & Straub, Stéphane, 2008. "The Emergence of Institutions," IDEI Working Papers 545, Institut d'Économie Industrielle (IDEI), Toulouse.
    • Handle: RePEc:ide:wpaper:11076
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    Cited by:

    1. Manuel Wäckerle & Bernhard Rengs & Wolfgang Radax, 2014. "An Agent-Based Model of Institutional Life-Cycles," Games, MDPI, vol. 5(3), pages 1-28, August.
    2. Kai A. Konrad & Wolfgang Leininger, 2007. "Self-enforcing Norms and the Efficient Non-cooperative Organization of Clans," Ruhr Economic Papers 0016, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    3. Martin Kolmar & Andreas Wagener, 2013. "Inefficiency As A Strategic Device In Group Contests Against Dominant Opponents," Economic Inquiry, Western Economic Association International, vol. 51(4), pages 2083-2095, October.
    4. Kai Konrad & Wolfgang Leininger, 2011. "Self-enforcing norms and efficient non-cooperative collective action in the provision of public goods," Public Choice, Springer, vol. 146(3), pages 501-520, March.
    5. Leininger, Wolfgang & Konrad, Kai A., 2007. "Self-enforcing Norms and the Efficient Non-cooperative Organization of Clans," CEPR Discussion Papers 6333, C.E.P.R. Discussion Papers.
    6. repec:zbw:rwirep:0016 is not listed on IDEAS

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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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