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On Corruption and Institutions in Decentralized Eco

Author

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  • Svetlana Andrianova

Abstract

This 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.

Suggested Citation

  • Svetlana Andrianova, 2006. "On Corruption and Institutions in Decentralized Eco," Discussion Papers in Economics 06/12, Division of Economics, School of Business, University of Leicester.
    • Handle: RePEc:lec:leecon:06/12
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    File URL: https://www.le.ac.uk/economics/research/RePEc/lec/leecon/dp06-12.pdf
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    More about this item

    Keywords

    Formal contract enforcement; perceptions; transition economies;
    All these keywords.

    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

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