Analyzing cooperation in institutional settings Illustration of two institutional arrangments

Abstract

newline vi newlineAbstract newlineIn any human society one could observe complex political and economic systems. newlineThey generally comprise of basic guaranteed rights, duties and rules and regulations newlineof behaviour. These systems whatever their features, essentially evolved as a newlinemechanism for avoiding or resolving situations of conflict. Increasing social welfare newlineoften involved finding solutions to coordination or market failures. In the Neoclassical newlineparadigm cooperative solutions to coordination problems are uncommon and therefore newlinean institutional perspective is better suited for this matter. The thesis makes an newlineargument that solutions to coordination failures can be understood in an institutional newlineframework. This is because cooperative solutions often take the form of institutions newlineformal or informal. In the thesis it is argued that institutions are instruments that allow newlinea movement from one particular configuration to an improved or better configuration. newlineThis movement is not possible without reaching an agreement on which particular newlineactions are to be taken and which ones are to be avoided. Reaching this agreement is newlineonly the first step. Once it is reached a significant number of individuals must newlineundertake actions which conform to the agreement. In case this does not happen the newlinesociety does not move to a better social outcome. Therefore, the overarching theme of newlinethe thesis revolves around two ideas. First, the recognition and identification of actions newlinethat generate benefit in the society. Second, the choice of individuals to undertake that newlineaction. newlineSince the emergence of New Institutional Economics movement study of institutions newlinehave regained prominence in the field of economic studies. Based on the review of newlineliterature one could make an argument that there are two main tenets of institutional newlineeconomics. First, institutions matter when it comes determining outcomes and they newlineaffect social welfare by guiding interaction among the members of the society towards newlinesocially desirable outcomes. Second, it has been observed some ins