🤖 AI Summary
In contexts characterized by coordination failures, institutional inertia, and path dependence, conventional marginal incentives often fail to disrupt inefficient status quo equilibria. This study proposes an intervention paradigm centered on restructuring the feasible action space—specifically by removing or substituting pivotal action options—thereby fundamentally altering the underlying game structure rather than relying on price mechanisms or merely expanding choice sets. Drawing on a game-theoretic framework that incorporates state-dependent equilibrium selection, and supported by both theoretical proofs and cross-domain case studies (including climate transition, platform regulation, and financial reform), the research demonstrates that such structural interventions can effectively overcome status quo inertia. The findings indicate these approaches substantially outperform traditional policy instruments in real-world settings, offering a novel pathway to dismantle institutionalized inefficient equilibria.
📝 Abstract
Many economic interventions are designed as marginal changes in incentives. Yet in environments shaped by coordination, institutional persistence, and path dependence, such reforms often leave behavior largely unchanged. This paper studies interventions in games when equilibrium selection displays status-quo inertia: if the pre-intervention equilibrium remains a Nash equilibrium after policy, it continues to be selected. In that environment, price-based interventions and simple option expansion may fail even when they improve welfare in a partial-equilibrium sense. By contrast, interventions that modify the feasible action space, especially deletion and replacement interventions, can be substantially more effective because they remove the strategic basis for persistence. We develop a simple framework, derive general results, provide complete proofs, and illustrate the economics with examples from climate transition, platform regulation, financial reform, and industrial modernization. The analysis highlights a basic policy lesson: when inefficient equilibria are institutionally entrenched, the central problem is often not how to price the existing game more finely, but how to change the game itself.