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The Emergence of Enforcement

Luca Anderlini, Leonardo Felli () and Michele Piccone

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: We ask how enforcement can endogenously emerge in a landscape in which only raw power, iron ï¬ sts, govern the interaction of agents. If two agents are ranked in terms of power, the more powerful one can expropriate, at a cost, the less powerful one. Alternatively, both agents can engage in surplus-augmenting cooperation (e.g. trade). If expropriation is not too costly and cooperation is not overwhelmingly productive, for any pair of ranked agents the possibility of expropriation prevents cooperation. The more powerful agent ï¬ nds it proï¬ table to expropriate the less powerful one. However, if expropriating agents who are net expropriators of others is cheaper, then a more powerful agent may endogenously become an “enforcer†for lower ranked agents. In equilibrium, the more powerful agent expropriates the less powerful ones by smaller amounts, and the less powerful ones cooperate and refrain from expropriating agents below them. This is because if they do not the more powerful agent will ï¬ nd it cheaper to expropriate only them by a larger amount. Surprisingly, the details of the power structure are irrelevant for enforcement to emerge as an equilibrium phenomenon provided that the original jungle is inhabited by a sufficiently large number of agents and by one that dominates all others.

Keywords: Enforcement; Jungle; Power Structures; Rule of Law (search for similar items in EconPapers)
JEL-codes: C79 D00 D01 D31 K19 K40 K49 (search for similar items in EconPapers)
Date: 2022-08-30
New Economics Papers: this item is included in nep-law and nep-mic
Note: lf454
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