Trust in the shadow of the courts

Geoffrey Brennan*, Werner Güth, Hartmut Kliemt

*Corresponding author for this work

    Research output: Contribution to journalArticlepeer-review

    13 Citations (Scopus)

    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 languageEnglish
    Pages (from-to)16-36
    Number of pages21
    JournalJournal of Institutional and Theoretical Economics
    Volume159
    Issue number1
    DOIs
    Publication statusPublished - Mar 2003

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