AbstractThis article responds to Paola Palminiello’s provocative and valuable essay in this issue. Three central points are made. First, rational choice theorists have not generally violated the strictures of methodological individualism in their treatments of institutions. Second, the bargaining theory advanced here as a theory of the emergence and reproduction of institutions is limited in that it applies only to circumstances of pure cooperation. The theory does not give attention to situations of potential cooperation involving conflicts of interest among parties, and it does not address situations involving substantial inequalities of power among parties. Finally, Palminiello’s argument that bargaining in the circumstances she singles out necessarily involves truthfulness on all sides is unproven.
Keywords: Institutions; Institutionalism; Rational Choice Theory; Collective Action; Microfoundations; Cooperation; Bargaining.