Institutions as game theory outcomes: toward a cognitive-experimental inquiry

The paper investigates two different approaches to the analysis of institutions using game theory and discusses their methodological and theoretical implications for further research. Starting from von Neumann and Morgenstern’s theory, we investigate how game theory has been applied to the analysis of institutions, these being considered, as in Hayek (1967, 1988a) as the unplanned outcomes of self-interested individual behavior. We focus on Schotter’s (1981) and Schelling’s (1960) alternative approaches. The different ways in which these authors use von Neumann and Morgenstern’s concepts of coalition and indeterminacy of solutions play an important role in explaining the spontaneous emergence of institutions from interaction. We argue that this issue is also of importance in explaining how Schotter and Schelling’s theories fit with the main features of Hayek's theory of institutions.