“Climbing the hierarchical ladders of rules”: A life-cycle theory of institutional evolution

Eric Brousseau and Emmanuel Raynaud ()

Journal of Economic Behavior & Organization, 2011, vol. 79, issue 1, 65-79

Abstract: This paper proposes an analysis of the emergence and evolution of institutional frameworks. It explains the causes, process, and outcome of institutional evolution. We first describe the institutional framework as a multilevel system at the bottom of which several “local and flexible” institutions apply to subsets of the society while, at the top, a single “generic and rigid” institution applies to all. Dissatisfied with generic order, promoters of local orders try to design collective governance solutions that are better suited to their needs. If agents are heterogeneous (as we assume), then coordination needs differ and a competitive process begins among sponsors of alternative orders. To benefit from efficiency gains, promoters of local orders encourage adherence to their preferred system of rules. The resulting competition for adherents explains why “local and voluntary” institutions might progressively turn into “generic and mandatory” ones. We thus establish a logical continuum between contractual governance mechanisms and institutions. We then analyze the strategic interplay among sponsors of alternative institutional orders by considering not only the “horizontal” competition among institutions emerging in the same time but also the “vertical” competition between promoters of new rules and sponsors of the established, more generic rules.

Keywords: Bargaining power; Clubs; Core members; Institutional framework; Institutional evolution; Institutional layers; Marginal members; Network externalities; Order (search for similar items in EconPapers)
JEL-codes: D02 D71 P14 P48 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167268111000588
Full text for ScienceDirect subscribers only

Related works:
Journal Article: "Climbing the hierarchical ladders of rules": A life-cycle theory of institutional evolution (2011)
Working Paper: Climbing the Hierarchical Ladders of Rules: A Life-cycle Theory of Institutional Evolution (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:79:y:2011:i:1:p:65-79

DOI: 10.1016/j.jebo.2011.01.027

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
Bibliographic data for series maintained by Catherine Liu ().