 Push factors of endogenous institutional changeJournal of Economic Behavior & Organization, 2021, vol. 189, issue C, 504-514 Abstract: Institutions are often modeled as Nash equilibria. The puzzle is how an institution can change endogenously, given that all players choose mutually best responses. To address this issue, the present paper proposes a framework that explicitly models players’ goals. It argues that the probabilities of attainment of players’ goals affect the stability of Nash equilibrium. If players fail to attain their goals in a Nash equilibrium, then this equilibrium is goal-unstable, as players are motivated to displace it. This goal-instability represents a push factor of institutional change. Since the goal-instability does not need to presuppose players’ knowledge of the desired outcome, the approach is consistent with the notion of entrepreneurial institutional innovation. It is shown that the proposed framework can provide micro-foundations for existing theories and extends the analysis to include open-endedness and the creative aspects of institutional change. This framework is applied to account for a change from coins to banknotes as a medium of exchange. Keywords: Institutions; Conventions; Nash equilibrium; Endogenous change; Push factors; Institutional entrepreneurship (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:189:y:2021:i:c:p:504-514 DOI: 10.1016/j.jebo.2021.07.005 Access Statistics for this article Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D. More articles in Journal of Economic Behavior & Organization from Elsevier |
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