An Essay in Modeling of Institutional Change

Economic analysis carried out with the help of models has been suffering from a lack of expression of institutional settings. Yet institutional change is at the heart of numerous transition processes around the globe. This chapter illustrates a way of modellinginstitutional arrangementsthrough the game theoretic framework, involving utility functions and game-forms. Illustrative analysis is provided for a well-defined classical case of land tenure institutions. Then, the chapter gives an analysis of a broader domain involving law-making, its effectiveness and enforcement. The chapter implies that the limits to market mechanisms ought to be taken into account when designing the institutional frameworks for the transition societies and economies.