A Fuzzy Logic and Default Reasoning Model of Social Norm and Equilibrium Selection in Games Under Unforeseen Contingencies

Abstract

This paper focuses on the role that social norms play in the selection of equilibrium points seen as social conventions under unforeseen contingencies - that is, their role in the emergence of regularities of behavior which are self-enforcing and effectively adhered to by bounded rational agents due to their self-policing incentives. Differently stated, given a set of game situations imperfectly described, we want to understand how general and abstract norms provide at least the starting point for a norm-based equilibrium selection reasoning procedure which in the end will be able to determine which equilibrium point, belonging to perfectly described games, will be played as the unique solution of each imperfectly described game. In order to solve such a problem we introduces a selection process based on the reformulation of default logic in terms of possibility theory.

Keywords: Social Norms, Equilibrium selection, Unforeseen Contingencies, Fuzzy Logic, Possibility Theory, Default Reasoning

JEL Classification: C70, C69, D83