Trust in the Shadow of the Courts

Geoffrey Brennan, Werner Güth () and Hartmut Kliemt

Journal of Institutional and Theoretical Economics (JITE), 2003, vol. 159, issue 1, pages 16-

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.

JEL-codes: A11 A13 C72 D74 K00 K12 (search for similar items in EconPapers)
Date: 2003

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Working Paper: Trust in the shadow of the courts (1997)
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