Abstract
Even if contract enforcers are as opportunistic as ordinary traders, a system of adjudication can increase the degree to which contractual obligations on large anonymous markets are fulfilled. Only if arbitrators receive a fixed income, occasional mistakes will not favour the untrustworthy. It can be shown that the presence of the courts may further the prospects of the trustworthy in a large class of situations. But under non-optimal court policies and unfavorable parameter constellations introducing courts may crowd out trustworthiness.
Original language | English |
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Pages (from-to) | 16-36 |
Number of pages | 21 |
Journal | Journal of Institutional and Theoretical Economics |
Volume | 159 |
Issue number | 1 |
DOIs | |
Publication status | Published - Mar 2003 |