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Contractual Enforcement Institutions and the Structure of Information

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  • Avery W. Katz

Abstract

Many economic writers on contract theory have assumed that legal institutions are simply unable to do the job of enforcement, and have thus attempted to devise arrangements that motivate the parties to keep their commitments even though a government tribunal would be unable to tell whether they had performed. But non-legal enforcement mechanisms operate both as substitutes and complements for legal mechanisms (and as substitutes and complements for each other). This essay sketches how parties should choose among available enforcement mechanisms, based on the costs of information and other transaction costs.

Suggested Citation

  • Avery W. Katz, 2008. "Contractual Enforcement Institutions and the Structure of Information," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 164(1), pages 134-154, March.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200803)164:1_134:ceiats_2.0.tx_2-
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    References listed on IDEAS

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    1. Bernheim, B Douglas & Whinston, Michael D, 1998. "Incomplete Contracts and Strategic Ambiguity," American Economic Review, American Economic Association, vol. 88(4), pages 902-932, September.
    2. Bernstein, Lisa, 1992. "Opting Out of the Legal System: Extralegal Contractual Relations in the Diamond Industry," The Journal of Legal Studies, University of Chicago Press, vol. 21(1), pages 115-157, January.
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    Cited by:

    1. George Hendrikse & Patrick Hippmann & Josef Windsperger, 2015. "Trust, transaction costs and contractual incompleteness in franchising," Small Business Economics, Springer, vol. 44(4), pages 867-888, April.
    2. Christoph Engel & Urs Schweizer, 2008. "Editorial Preface," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 164(1), pages 1-3, March.
    3. Sylvain Rossiaud, 2014. "Opening the upstream oil industry to private companies," Working Papers halshs-00960681, HAL.
    4. Alan Schwartz, 2008. "Contractual Enforcement Mechanisms and the Structure of Information. Comment," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 164(1), pages 155-158, March.
    5. Urs Schweizer, 2008. "Contractual Enforcement Institutions and the Structure of Information. Comment," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 164(1), pages 159-162, March.
    6. Sylvain Rossiaud, 2015. "L’ouverture de l’amont pétrolier à des compagnies privées. Un cadre d’analyse en termes d’économie des coûts de transaction," Post-Print hal-01162793, HAL.
    7. Bruno, Randolph Luca, 2019. "Tax enforcement, tax compliance and tax morale in transition economies: A theoretical model," European Journal of Political Economy, Elsevier, vol. 56(C), pages 193-211.

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    More about this item

    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law

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