SOCIAL NORMS AND RANDOM MATCHING GAMES

Nash equilibrium has been tremendously useful in understanding economi c problems in which strategic behavior is important. The theoretical f oundations of the solution concept often include the assumption that t he game to be played is common knowledge, an unrealistic assumption in games with many players. We introduce the concept of norm equilibrium for random matching games. A norm equilibrium is a Nash equilibrium t hat relies on substantially less information than common knowledge of the game. We use norm equilibria to provide a folk theorem for random matching games and to analyze increasing numbers of players in a rando m matching game. Journal of Economic Literature Classification Numbers : C70, C72. (C) 1995 Academic Press, Inc.