Institutions and Formal Theory: What Do We Learn From a Game- Theoretic Definition of Institutions? Hanno Scholtz 1 Abstract Since the advent of formal economics in the late 19th century there has been a latent trade-off between formal and institutional economics. A quarter century ago, Douglass North bridged some of the divide between the two strands. However to grasp the full strength of formal modelling for institutional analysis and institutional design his task has to be complet- ed by stating the definition for institutions in terms of formal game theory. Starting from classical examples, this article defines institutions as sets of stable Nash equilibria arising from humanly devised additional elements in the game structure of human interaction. The article is organized into a brief overview of the relationship between formal and institutional economics, the derivation and a short discussion of the definition, and examples illustrating the productivity of the approach. JEL Codes: D02, C70, N00, O12, J12 Keywords: Institutions, institutional theory, game theory, definition, regulation, history of eco- nomic thought, institutional change, formalism, formal theory, coordination, modernization, ra- tionality, prisoners‘ dilemma, trust game, marriage, patriarchy, alimony, welfare states 5995 words (text), 7546 words (complete article) 1 University of Konstanz, Dept. of Sociology, D-78457 Konstanz, Germany, hanno.scholtz@uni-konstanz.de. Acknowledgements: This article is based on parts of a larger book project that has been undertaken while I was teaching at the universities of Berne, Zurich, Leipzig, Konstanz, and Erlangen. I thank Daniel Degen, Karl-Dieter Opp, Thorsten Berndt, Thomas Hinz, and the students in the respective courses for their feedback and suggestions.