EMERGENCE OF SOCIAL CONVENTIONS: AN APPROACH BASED ON DECENTRALIZED INTERACTIONS OF INDIVIDUALS AND STRATEGIES CHARACTERIZED BY PROBABILISTIC SETS

Abstract

There is an agreement that the existence of social conventions is relevant for the individual economic behavior, but it still is necessary to explain both, the origin of conventions and the process of formation of conventions. In this paper we adopt the path-depended interaction, decentralized evolutionary process approach to address conventions and their formation. We suggest a population-based simulation model of bounded-rational individuals with incomplete information that, with some degree, interact imitating the behavior observed from other individuals of the population. The model uses decentralized interactions strategies in which unanimity and majority emerge. We also suggest an interaction strategy based on probabilistic. sets. The use of probabilistic sets introduces heterogeneity and improve individual rationality, turning model much more realistic. The model has been used to investigate the emergence theory of money and the technological standard choice theory. The results show that the model faithfully captures the essence of the behaviors expected in these scenarios.