Endogenous convention, prejudice, and trust in demographic summary games

Many economic environments exhibit payoff discontinuity and indeterminacy, particularly those involving factors that are not under the deliberate control of players, such as prejudicial bias and trust. Simon and Zame (1990) introduce the concept of sharing rules as a means for endogenously resolving such indeterminacy when the player set is finite. We extend the Simon and Zame methodology to environments including large players whose individual actions may be felt economy-wide as well as infinitesimal players whose actions impact others only through the aggregate behavior of the demographic groups to which they belong. In effect, our analysis endogenizes the equilibrium actions of economic agents as well as the social conventions and personal beliefs that prevail.