The Economics of Convention

  title={The Economics of Convention},
  author={H. Peyton Young},
  journal={Journal of Economic Perspectives},
  • H. Young
  • Published 1996
  • Economics
  • Journal of Economic Perspectives
The purpose of conventions is to coordinate people's expectations in economic and social interactions that have multiple equilibria. Conventions often emerge endogenously from the accumulation of many precedents, a process that can be modeled as a stochastic dynamical system. The theory leads to specific predictions about the ways in which conventions form and are displaced, and identifies key properties of conventions that are most likely to withstand the test of time. The theory is… Expand

Figures from this paper

This paper aims to integrate both economic and sociological notions of conventions in a single analytical framework. To this end, it starts by distinguishing conceptually between behavioralExpand
When and why Conventions cannot Be Social Institutions
The paper focuses on the issue of compatibility of social institution and convention. At first, it introduces the modest account of conventionality building on five distinctive features –Expand
Are conventions solutions to uncertainty? contrasting visions of social coordination
In recent years, there has been an increase in research on conventions motivated by the game-theoretic contributions of the philosopher David Lewis. Prior to this surge in interest, discussions ofExpand
Uncertainty, Conventional Behavior, and Economic Sociology
This paper addresses the problem of the conceptualization of social structure and its relationship to human agency in economic sociology. The background is provided by John Maynard Keynes'sExpand
What constitutes a convention? Implications for the coexistence of conventions
A model of repeated play of a coordination game, in which stage games have a location in social space and players receive noisy signals of the true location of their games, is reviewed. Sugden (1995)Expand
Non-Exclusive Conventions and Social Coordination
We study the long run outcome when communities with different conventions interact. We introduce the notion of non-exclusive conventions to model the idea that, by incurring some additional costs,Expand
Evolution of the Week
The purpose of this paper is to provide an intuitive explanation of the emergence and evolution of the week based on a historical precedent draw from ancient Egypt. In this paper, we view the week asExpand
The French economics of conventions: interpretation, legitimacy, justification, uncertainty, and norms
A new approach to economic institutions and conventions emerged in France in the late 1980s. It is called l'économie des conventions (the economics of conventions). In English, an alternative labelExpand
Are conventions solutions ? Contrasting visions of the relationship between convention and uncertainty
This paper maps out different conceptions and dynamic accounts of convention developed within game theory, Post Keynesian economics and the economie des conventions. These accounts are distinguishedExpand
The Evolution of Social Norms
Social norms are patterns of behavior that are self-enforcing within a group: Everyone conforms, everyone is expected to conform, and everyone wants to conform when they expect everyone else toExpand


This paper examines the dynamics of allocation under increasing returns within a model where agents choose between technologies competing for adoption and where each technology improves as it gainsExpand
The Evolution of Conventions
The author shows how a group of individuals can learn to play a coordination game without any common knowledge and with only a small amount of rationality. The game is repeated many times byExpand
Dynamic models of segregation
The systemic effects are found to be overwhelming: there is no simple correspondence of individual incentive to collective results, and a general theory of ‘tipping’ begins to emerge. Expand
Evolution of Equilibria in the Long Run: A General Theory and Applications
Abstract We extend the evolutionary process studied in Kandori et al., Econometrica 61 (1933), 29-56 to n × n games. The evolutionary process is driven by two forces: players switching to the bestExpand
Bargaining and Markets
Introduction. Bargaining Theory: The Axiomatic Approach. Nash's Solution. The Strategic Approach. A Model of Alternating Offers. The Relation between the Axiomatic and Strategic Approaches. AExpand
Cooperation in the long-run
Abstract The long-run behavior of economic and biological processes is often dramatically altered when stochastic influences are taken into account. In fact, the smaller the noise, the more drasticExpand
Incentives and Risk Sharing in Sharecropping
At least from the time of Ricardo, economists have begun their investigations of how competitive markets work, how wages, rents and prices are determined, by a detailed examination of agriculture.Expand
Learning, Local Interaction, and Coordination
This paper discusses the dynamic implications of learning in a large population coordination game, focusing on the structure of the matching process that describes how players meet. As in M. Kandori,Expand
Focal points and bargaining
The equilibrium actually achieved in a session turns out to be a very good predictor of what the median subject says is “fair” in the game after play is over, not supportive of the view that strategic considerations in such situations can be neglected in favor of a study of fairness norms. Expand
The Bargaining Problem
A new treatment is presented of a classical economic problem, one which occurs in many forms, as bargaining, bilateral monopoly, etc. It may also be regarded as a nonzero-sum two-person game. In thisExpand