Problems in the Theory of Institutional Design

Abstract

Many political institutions can be viewed as methods for achieving desired outcomes. The problem of institutional design is that of finding a mechanism that would result in those desired outcomes as game-theoretic equilibria. Some results from the institutional design literature are reviewed, and it is argued that many of them are based on assumptions that should be critically examined. We focus on behavioural and information-related assumptions as well as on the concepts of equilibria utilized in the institutional design literature.