On Corruption and Institutions in Decentralized Eco
AbstractThis paper presents a model of opportunistic behaviour in decentralized economic exchange and considers the impact of inadequate institutional framework of formal contract enforcement on economic performance. It is shown that (i) when the number of cheating traders is sufficiently large, inadequate institutions result in a loss of decentralized trading contracts, (ii) an adequate institutional framework, while being necessary for the attainment of a Pareto optimal outcome, may not be sufficient if traders perceive it as inadequate; and (iii) sufficiently good formal enforcement provisions help deter contractual breach in enviroments with corrupt and powerful enforcers.
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Bibliographic InfoPaper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 06/12.
Date of creation: Sep 2006
Date of revision:
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Find related papers by JEL classification:
- C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-09-30 (All new papers)
- NEP-LAW-2006-09-30 (Law & Economics)
- NEP-REG-2006-09-30 (Regulation)
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