From Self-Enforcing Agreements to Self-Sustaining Norms
AbstractSelf-enforcing agreements, such as relational contracts and international agreements, prescribe
actions and rules enforcing these actions, but typically ignore agents’ ability to change
these rules. This paper studies self-sustaining norms, which prescribe how individuals react
to one another’s actions but also to proposals to change the rules. We characterize the set of
self-sustaining norms when agents interact frequently, which has a remarkably simple structure.
Inefficient norms may arise even when all actions are public and frequent and agents can credibly
commit to rules.