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Trust in the Shadow of the Courts

Author

Listed:
  • Geoffrey Brennan
  • Werner Güth
  • Hartmut Kliemt

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.

Suggested Citation

  • Geoffrey Brennan & Werner Güth & Hartmut Kliemt, 2003. "Trust in the Shadow of the Courts," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 159(1), pages 16-36, March.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200303)159:1_16:titsot_2.0.tx_2-t
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    References listed on IDEAS

    as
    1. Frey, Bruno S, 1997. "A Constitution for Knaves Crowds Out Civic Virtues," Economic Journal, Royal Economic Society, vol. 107(443), pages 1043-1053, July.
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    Cited by:

    1. Gãœth, Werner & Ockenfels, Axel, 2005. "The coevolution of morality and legal institutions: an indirect evolutionary approach," Journal of Institutional Economics, Cambridge University Press, vol. 1(2), pages 155-174, December.
    2. Güth Werner & Kliemt Hartmut & Peleg Bezalel, 2000. "Co-evolution of Preferences and Information in Simple Games of Trust," German Economic Review, De Gruyter, vol. 1(1), pages 83-110, February.
    3. Fali Huang, 2007. "Building Social Trust: A Human-Capital Approach," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 163(4), pages 552-573, December.
    4. Robert E. Goodin, 2000. "Trusting Individuals Versus Trusting Institutions," Rationality and Society, , vol. 12(4), pages 381-395, November.
    5. Marian Panganiban, 2015. "To friends everything, to strangers the law? An experiment on contract enforcement and group identity," Jena Economics Research Papers 2015-015, Friedrich-Schiller-University Jena.
    6. Geoffrey Brennan & Giuseppe Eusepi, 2013. "Buchanan, Hobbes and contractarianism: the supply of rules?," Chapters, in: Francisco Cabrillo & Miguel A. Puchades-Navarro (ed.), Constitutional Economics and Public Institutions, chapter 2, pages 17-34, Edward Elgar Publishing.
    7. Kirchgässner, Gebhard, 2010. "On minimal morals," European Journal of Political Economy, Elsevier, vol. 26(3), pages 330-339, September.
    8. Werner Gueth & Axel Ockenfels, 2000. "Evolutionary Norm Enforcement," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 156(2), pages 335-335, June.
    9. Hartmut Kliemt, 2010. "The PPE enterprise: Common Hobbesian roots and perspectives," Politics, Philosophy & Economics, , vol. 9(4), pages 398-410, November.
    10. Paul G. Mahoney, 1998. "Trust and Opportunism in Close Corporations," NBER Working Papers 6819, National Bureau of Economic Research, Inc.

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    More about this item

    JEL classification:

    • A11 - General Economics and Teaching - - General Economics - - - Role of Economics; Role of Economists
    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • K00 - Law and Economics - - General - - - General (including Data Sources and Description)
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law

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