For citation:
Sukharev, O. S. (2021). Information and Institutional Choice in Models of Agency Interactions. Zhurnal Economicheskoj Teorii [Russian Journal of Economic Theory], 18(1), 69-86, https://doi.org/10.31063/2073-6517/2021.18-1.5.
Abstract:
The paper discusses the neo-institutional approach to the study of agent interactions based on information exchange and the institutional choice for the use of a common resource. The aim of the study is to formalize the model of interaction between two agents exchanging information and finding various modes of such exchange, which are determined by the influence of information transfer of institutions. This enables us to adjust the standard scheme applied to study the institutional choice, which involves the demonstration of the Prisoner’s Dilemma game take and discussion of the example of adverse selection. The research methodology is based on the theory of new institutionalism developed by the Coase-Ostrom scientific school. We expand this approach by removing model constraints and conventions of institutional choice to describe the general theoretical provisions covering various institutional situations that are difficult to study only through field research. This research also discusses the questions not taken into account by the above-mentioned methodology: the institutions as a kind of a common resource and behavior of agents in situations where there is no institutional choice or the choice is determined by the criteria other than the expected benefits and costs and not only by a set of normally established situational variables. The proposed model results not only in finding information exchange regimes and the types of adaptation of the corresponding agents, but also in the determination of an acceptable decision-making zone within the framework of institutional choice, according to simultaneously applied criteria — an increase in the general welfare, material component of welfare and reduction in information asymmetry. It is shown that the regulatory parameters that correspond to the influence of institutions on the transfer of information from one agent to another can be dependent or not, but affect their respective channels of information transfer in their own way. The adverse selection model is determined not only by information asymmetry, but also by other institutional conditions related to the characteristics of a given market, a third party’s influence on the deal, as opposed to the external effect mechanism. This brings us to the fact that the inherent properties of adverse selection — lowering of the price of goods and quality loss — cease to have effect. Areas of future research may include an expanded application of this model to institutions as a public resource.
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