„Institutions are the rules of a game in a society or, more formally, are the humanly devised constraints that shape human interaction. In consequence, they structure incentives in human exchange, whether political, social, or economic.” (Douglass North, 1990)
The quote of Nobel Laureate Douglass North allows for a broad view on the object of study of Institutional Economics. Indeed, the word „institutions” has several connotations. Large organizations are associated with the term, but it also applies to traditions, systems, rules or policies. Institutions include diverse concepts such as markets, laws, currencies or contracts. A comprehensive perspective on the institutional setting is key to Institutional Economics, recognizing the relevance of both, formal and informal institutions.
Our research contributes to understanding:
1. How individuals respond to the incentive structure imposed by the institutional framework,
2. how such behaviour translates into aggregate economic outcomes,
3. how the institutional framework is shaped by individual preferences, beliefs and behaviour, and
4. how well the institutions serve the interests of the society whose „rules of the game” they define.
We tackle these questions with formal-theoretical and empirical methods.