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Courts and Relational Contracts

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Listed:
  • Simon Johnson
  • John McMillan

Abstract

Post-communist countries offer new evidence on the relative importance of courts and relationships in enforcing contracts. Belief in the effectiveness of courts has a significant positive effect on the level of trust shown in new relationships between firms and their customers. Well-functioning courts also encourage entrepreneurs to try out new suppliers. Courts are particularly important when specific investments are needed for a relationship to develop. While relationships can sustain existing interactions, workable courts help new interactions to start and develop. Copyright 2002, Oxford University Press.

Suggested Citation

  • Simon Johnson & John McMillan, 2002. "Courts and Relational Contracts," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 18(1), pages 221-277, April.
    • Handle: RePEc:oup:jleorg:v:18:y:2002:i:1:p:221-277
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    References listed on IDEAS

    as
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    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • G0 - Financial Economics - - General

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