Kinked Social Norms and Cooperation Sergio Currarini (U. Venezia C Foscari) & Marco A. Marini (U. Urbino "Carlo Bo) September 2007 Abstract We investigate which specic social norrns of behauiour - here narrowly interpreted as a commonly shared expectations over people behaviour - can sustain a cooperative outcome. We show that in a symmetric setting a specic social norm, one shaping the expected. response of all players in the event of individual or coalitional deviations from any collective choice, plays a special role in making.a cooperative outcome stable. Such a norm turns out to be strikingly similar to that assumed in the classical kinked- demand model by Robinson (1933) and Sweezy (1939) (see also Hall and Hitch (1939)) for rms operating in imperfectly competitive markets. Keywords: Kinked Demand, Symmetric Games, Norms of Behaviour, Coalitions. 1 Introduction Often in their social interaction individuals adopt simple behavioural proce- dures. Social scientists talk to various degree, and with di/erent meanings, of heuristics, conventions and norms of behaviour. Their emergence can be spontaneous, arising from the evolution of shared expectations into prescrip- tions and then into norms of behaviour (see, for instance, Lewis 1969, Bicchieri, 1990 and Castelfranchi et a1., 2002). This is a pervasive phenomenon in mod- ern economies and economic actors, as companies managers, market traders and CEOs as well as workers and people in general appear similarly inclined to adopt simple procedures rather than complex and elaborate strategies, spe- cially when they have to promptly react to unexpected events. Once established within an organization, i.e.a rm, a set of norms may constitute its corporate culture. 1 Since usually norms are strictly linked to social expectations and then to conjectures individuals form over the behaviour of other people, it is worth to investigate wich form these forces have to take to sustain a cooperative outcome 1 The corporate culture acts as a perception lter, a/ects the interpretation of information, sets moral and ethical standards, provide rules, norm and heuristics for action, and inuences how power and authority are wielded in reaching decision regarding what action to pursue. (Brown, 1995, p. 197) 1