Conventions: Some Conventional and Some Not So Conventional Wisdom

Siegfried Berninghaus (), Werner Güth () and Hartmut Kliemt ()
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Siegfried Berninghaus: Department of Economics, University of Karlsruhe, Karlsruhe, Germany
Hartmut Kliemt: Department of Philosophy, University of Duisburg-Essen, Duisburg, Germany

Homo Oeconomicus, 2005, vol. 22, pages 147-168

Abstract: Problems of social coordination can be formalized as non-cooperative games with several equilibria. We know that in such situations serious problems of equilibrium selection arise which cannot be solved by traditional game theoretical reasoning. Conventions seem to be a powerful tool to solve equilibrium selection problems in real world societies. Essentially, two questions will be addressed in this paper: (a) Which conventions will emerge in a society? (b) How can a society break away from an inferior and reach a superior convention? It turns out that “risk dominance” of a convention plays a crucial role in dealing with both questions and generally in the evolution of conventions.

Date: 2005

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