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Thibaut and Kelley's view of norms as substitutes for informalinfluence has a similar functionalist flavor. As an example, theyconsider a repeated battle of the sexes game. In this game somebargaining is necessary for each party to obtain, at leastoccasionally, the preferred outcome. The parties can engage in a costlysequence of threats and promises, but it seems better to agreebeforehand upon some rule for trading, such as alternating between therespectively preferred outcomes. Rules emerge because they reduce thecosts involved in face-to-face personal influence. Likewise,Ullman-Margalit (1977) uses game theory to show that norms solvecollective action problems, such as prisoner's dilemma-typesituations; in her own words, “… a norm solving the probleminherent in a situation of this type is generated by it” (p. 22).In a collective action problem, rational choices produce aPareto-inefficient outcome. Pareto-efficiency is restored by means ofnorms backed by sanctions. Coleman, too, believes that normsemerge in situations in which there are externalities, i.e., in allthose cases in which an activity produces positive or negative effectson other people that typically have no legal means to enforce thecontinuation/cessation of the activity. Thus the producer of theexternality pays no cost/reaps no benefit for the additional effect ofhis activity. A norm solves the problem by prescribing or proscribingthe externality-producing action. The simplest example is a repeatedprisoner's dilemma, in which the cooperative action of one playerproduces a positive externality for the other. Thus each has anincentive to induce cooperation in the other player by establishing acooperative norm, i.e., a set of sanctions punishing defection andrewarding cooperation.

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