Introducing social norms in game theory

Abstract

This paper explicitly introduces norms in games, assuming that they shape (some) players’ utility. People feel badly when they deviate from a binding norm, and the less other players deviate, the more badly they feel. Further, people anger at transgressors and get pleasure from punishing them. I then study how social norms and emotions affect competition, cooperation, and punishment in a variety of games. The model is consistent with abundant experimental evidence that alternative models of social preferences cannot explain.