Depending upon the analytical structure of the action situation and the particular model of the individual used, an analyst makes strong or weak inferences about results.
In tightly constrained actions situations, where participants are motivated to select particular strategies, or chains of actions, which jointly lead to stable equilibria, an analyst can make strong inferences and specific predictions about likely patterns of behavior and outcomes. Many situations, however, are not so narrowly constrained. Within more open situations, participants may adopt a broader array of strategies, and change their strategies over time as they learn about the results of past actions.
The Institutional Analyst, examining these more open, less constrained, situations makes weaker inferences and predicts patterns of outcomes that are relatively more or less likely to result from a particular type of situation. Even weak inferences have an importance in specifying general tendencies. Predicting what will not occur may be all that an analyst can do, but such predictions are still useful.
Many useful analyzes have been conducted at this focal level. Besides the predictions concerning various types of results in markets structured in different ways (i.e., monopoly, oligopoly, monopolistic competition, perfect competition), important and practical implications can be derived in many other types of arenas. For example:
In superior-subordinate, command arenas – information and control loss will cumulate in an exponential manner as the number of linkages in the system are increased unless redundant channels are built into the system.
In committee or legislative arenas – policy outcomes will be biased toward those preferred by participants in positions with agenda control powers if only simple majority rule mechanisms are utilized.
In open-access, common-pool resource arenas – as demand approaches the sustained yield of the resource, participants will be lead to increase their individual demands which will cumulatively lead to overproduction from the resource. >> yield
What is rather amazing is the number of different types of arenas which can be constructed at a focal level using only the seven types of variables characterizing the action situation and relatively simple models of individual actors. The same underlying set of variables can be used to analyze seemingly different types of arrangements. Further, complex multi-layered institutional arrangements can be constructed from these simpler analytical units. The focal level of analysis is sufficient when the primary aim of an analysis is that or prediction. Most of the existing analytical theories in modern social science concentrate analysis at this level.
While considerable work on institutional arrangements can be conducted at this level, the initial focal level is not, however, fully adequate as a source of explanation for results. For those scholars and activists who are interested not only in gaining predictions for empirical testing but also in understanding how situations are constructed so that they can be changed – for the reformers of the world of which we are a part – starting with the elements of an action situation as GIVENS is not sufficient. If the beneficial results of a perfectly competitive market are dependent upon the presence of a large number of buyers and sellers, what factors affect the entry and exit of participants from a market? If the results depend upon individuals being able to transfer ownership over property in a relatively low cost transaction, what physical and legal factors affect the clarity, simplicity, and cost of property transactions? If the results depend upon owners being able to exclude others from use, how is the presence, reliability, and honesty of a police and court system related to the use of market? Similarly, how does a culture of mutual trust or of mutual distrust affect the capacity to engage in market relationships?
⇒ The Contextural Level of Analysis – Rules, Goods, and Community Understanding