ABSTRACT
The change of formal institutions appears to be conceptually entirely different from the change of informal institutions. The latter are usually the result of processes of self-organization that can be modeled as strategic interactions in games or as frequency-dependent processes in which the payoff from adhering to a certain informal rule rises with the share of individuals who already follow this rule. A simple and familiar example is the rule of driving on the right track of the road. If one expects that the share of individuals who are right-hand drivers is close to unity, then it would obviously be individually irrational to become a left-hand driver and thereby raise the risk of an accident. A formal rule would not be necessary once an equilibrium has been reached in which the vast majority of individuals have settled to have identical expectations about the behavior of their peers (Dopfer 1991). The same frequency-dependent process works for rules clarifying how to produce a computer keyboard (David 1985). Similarly, if doing business in a certain country presupposes bribery, then strict adherence to an informal rule of non-corruption would be irrational from the perspective of an individual firm attempting to enter the market.
