Abstract

This paper develops a model of social norms and cooperation in large societies. Within this framework we use an indirect evolutionary approach to study the endogenous formation of preferences and the co-evolution of norm compliance. Thereby we link the multiplicity of equilibria, which emerges in the presence of social norms, to the evolutionary analysis: Individuals face situations where many others cooperate as well as situations where a majority free-rides. The evolutionary adaptation to such heterogeneous environments will favor conditional cooperators, who condition their pro-social behavior on the others' cooperation. As conditional cooperators react flexibly to their social environment, they dominate free-riders as well as unconditional cooperators.