The Choice of Institutions: The Role of Risk and Risk-Aversion (original) (raw)

How Institutions Shape Uncertainty and Risk

Internext

Purpose: The study proposes a conceptual framework on how institutions influence risk and uncertainty. Beyond the nuances in defining the concepts in the existing literature, the role of institutions in shaping risks and uncertainties remains understudied. This paper adopts the new institutional economics (NIE) perspective to revisit the concepts of risk and uncertainty and provide a deeper reflection about its interactions with formal and informal institutions. Method: Our conceptual model is based on four propositions that support a theoretical explanation about the relationships between institutions and uncertainties, institutions and risks, and uncertainties and risks. Findings: While formal institutions have a primary role in reducing uncertainties, informal institutions can be seen as a source of risk. These findings imply firms’ strategic decisions. In this regard, we also provide a research agenda for future empirical studies in the area. Originality/value: The study highlig...

SUMMARY : Rationality and institutions : an inquiry into the normative implications of rational choice theory

2008

PHD THESIS SUMMARY: Rationality and institutions: an inquiry into the normative implications of rational choice theory. In my dissertation, I aim to analyze what a desirable basic institutional structure looks like from the perspective of rational choice theory. While the main topic is thus normative in nature, I start by clarifying in the first part what the notion of rationality exactly entails. I do so by focusing explicitly on the economic conception of rationality, according to which a rational individual is motivated to serve his self-interest on the basis of cost-benefit calculations. Such a homo economicus is characterized by intentional and instrumental actions, perfectly informed beliefs and exogenously given and egoistic preferences. In my view, however, this model is inadequate if one aims to understand what it means to be rational. All of the above mentioned requirements turn out to be overly demanding in this respect. That is why I suggest dropping these assumptions in...