Rational Actors, Equilibrium, and Social Institutions
Examines the usefulness of an equilibrium-based rational choice theory for analysis of the efficacy of informal & formal social institutions in combining beliefs & conduct in such a way as to constrain individual behavior. An equilibrium-based rational choice model of repeated cooperation in the two-player prisoner's dilemma game is constructed to ascertain the organizational effectiveness of various equilibria. Absent communication, equilibrium is achieved in a kind of tit-for-tat strategy of individual punishments. When the model is revised to allow communication, it is found that a true institution is achieved in which the whole group monitors & punishes deviant behavior, but this outcome is accomplished at significant costs. Such costs are partly ameliorated with the establishment of a central communication system directed by a single enforces. While the creation of a director reduces the costs of communication, it also raises the issue of who monitors the director. The notion of institutions as equilibria is defended as a useful approach for analyzing institutional stability & the effects of institutions in various areas of social life. 4 Tables. D. M. Smith