IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Contratti Incompleti Ed Enforcement Endogeno. Una Rassegna Della Letteratura
[Incomplete Contracts and Endogenous Enforcement. A Survey]

  • Scoppa, Vincenzo

When Court enforcement is excessively difficult or costly, agents are often able to create «endogenous enforcement mechanisms», that is, to design agreements so that each party finds it optimal to carry them out (self-enforcing implicit contracts), thanks to the threat of sanctions affecting the defaulting party, imposed by direct counterparts in the relationship (bilateral enforcement) or by external agents, future potential partners (multilateral enforcement). In this paper it is shown, in a game theoretical framework, the main features and constraints of these endogenous enforcement devices through a survey of the models proposed in the literature. Self-enforcing contracts are viewed as Nash equilibria of repeated games sustained by termination-type and boycotting strategies. The prevailing enforcement mechanism depends on: the information available to internal and external agents; the kind of costs that agents are able to impose on the cheating part; the incentives to apply sanctions. The bilateral mechanism requires only that information is available to the direct counterpart; the effectiveness of sanctions depends on the existence of a flow of quasi-rents from continuing the relationship, caused by switching costs, specific investments or market disequilibrium. The working of a multilateral enforcement mechanism depends on an efficient external transmission of information. However, contractual enforcement is possible even if each single relationship does not generate quasi-rents, has a known endpoint and the agents’ time horizon is finite. In some cases, auxiliary private institutions can emerge to gather and spread information and solve problems of punishment coordination. The working of markets and their efficiency is altered by enforcement problems

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: https://mpra.ub.uni-muenchen.de/17284/1/MPRA_paper_17284.pdf
File Function: original version
Download Restriction: no

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17284.

as
in new window

Length:
Date of creation: 2003
Date of revision:
Handle: RePEc:pra:mprapa:17284
Contact details of provider: Postal:
Ludwigstraße 33, D-80539 Munich, Germany

Phone: +49-(0)89-2180-2459
Fax: +49-(0)89-2180-992459
Web page: https://mpra.ub.uni-muenchen.de

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Baker, George P, 1992. "Incentive Contracts and Performance Measurement," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 598-614, June.
  2. Steve Tadelis, 1997. "What's in a Name? Reputation as a Tradeable Asset," Working Papers 97033, Stanford University, Department of Economics.
  3. Carmichael, H Lorne, 1984. "Reputations in the Labor Market," American Economic Review, American Economic Association, vol. 74(4), pages 713-25, September.
  4. Luis M.B. Cabral, 2000. "Stretching Firm and Brand Reputation," RAND Journal of Economics, The RAND Corporation, vol. 31(4), pages 658-673, Winter.
  5. Kreps, David M, 1997. "Intrinsic Motivation and Extrinsic Incentives," American Economic Review, American Economic Association, vol. 87(2), pages 359-64, May.
  6. Nelson, Philip, 1974. "Advertising as Information," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 729-54, July/Aug..
  7. B. Douglas Bernheim & Michael D. Whinston, 1997. "Incomplete Contracts and Strategic Ambiguity," Harvard Institute of Economic Research Working Papers 1787, Harvard - Institute of Economic Research.
  8. MacLeod, W Bentley & Malcomson, James M, 1988. "Reputation and Hierarchy in Dynamic Models of Employment," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 832-54, August.
  9. George J. Mailath & Larry Samuelson, . "Who Wants a Good Reputation?," Penn CARESS Working Papers a3e3219aee004bd237f8112f9, Penn Economics Department.
  10. George Baker & Robert Gibbons & Kevin J. Murphy, 1994. "Subjective Performance Measures in Optimal Incentive Contracts," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 1125-1156.
  11. Hirshlifer, David & Rassmusen, Eric, 1989. "Cooperation in a repeated prisoners' dilemma with ostracism," Journal of Economic Behavior & Organization, Elsevier, vol. 12(1), pages 87-106, August.
  12. Greif, Avner, 1993. "Contract Enforceability and Economic Institutions in Early Trade: the Maghribi Traders' Coalition," American Economic Review, American Economic Association, vol. 83(3), pages 525-48, June.
  13. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
  14. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414.
  15. Dawes, Robyn M & Thaler, Richard H, 1988. "Anomalies: Cooperation," Journal of Economic Perspectives, American Economic Association, vol. 2(3), pages 187-97, Summer.
  16. Fafchamps, Marcel, 1996. "The enforcement of commercial contracts in Ghana," World Development, Elsevier, vol. 24(3), pages 427-448, March.
  17. MacLeod, W Bentley & Malcomson, James M, 1998. "Motivation and Markets," American Economic Review, American Economic Association, vol. 88(3), pages 388-411, June.
  18. Scoppa Vincenzo, 2001. "I vincoli al licenziamento come "commitment device" nei contratti impliciti incentivanti," Politica economica, Società editrice il Mulino, issue 1, pages 47-72.
  19. David Kreps & Paul Milgrom & John Roberts & Bob Wilson, 2010. "Rational Cooperation in the Finitely Repeated Prisoners' Dilemma," Levine's Working Paper Archive 239, David K. Levine.
  20. Greif, Avner, 1994. "Cultural Beliefs and the Organization of Society: A Historical and Theoretical Reflection on Collectivist and Individualist Societies," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 912-50, October.
  21. Guttman, Joel M., 1992. "The credibility game: Reputation and rational cooperation in a changing population," Journal of Comparative Economics, Elsevier, vol. 16(4), pages 619-632, December.
  22. Stephen Knack & Philip Keefer, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1251-1288.
  23. Abhijit V. Banerjee & Esther Duflo, 2000. "Reputation Effects and the Limits of Contracting: A Study of the Indian Software Industry," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 989-1017.
  24. James W. Friedman, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Oxford University Press, vol. 38(1), pages 1-12.
  25. Simon Johnson & John McMillan & Christopher Woodruff, 2001. "Courts and Relational Contracts," NBER Working Papers 8572, National Bureau of Economic Research, Inc.
  26. Hogan, Chad, 2001. "Enforcement of Implicit Employment Contracts through Unionization," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 171-95, January.
  27. Jacques Cremer, 1986. "Cooperation in Ongoing Organizations," The Quarterly Journal of Economics, Oxford University Press, vol. 101(1), pages 33-49.
  28. Fudenberg, Drew & Maskin, Eric, 1986. "The Folk Theorem in Repeated Games with Discounting or with Incomplete Information," Econometrica, Econometric Society, vol. 54(3), pages 533-54, May.
  29. B. Douglas Bernheim & Michael D. Whinston, 1990. "Multimarket Contact and Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 1-26, Spring.
  30. Michihiro Kandori, 1992. "Repeated Games Played by Overlapping Generations of Players," Review of Economic Studies, Oxford University Press, vol. 59(1), pages 81-92.
  31. Pearce, David G. & Stacchetti, Ennio, 1998. "The Interaction of Implicit and Explicit Contracts in Repeated Agency," Games and Economic Behavior, Elsevier, vol. 23(1), pages 75-96, April.
  32. Bengt Holmstrom, 1999. "Managerial Incentive Problems: A Dynamic Perspective," NBER Working Papers 6875, National Bureau of Economic Research, Inc.
  33. Kranton, Rachel E, 1996. "Reciprocal Exchange: A Self-Sustaining System," American Economic Review, American Economic Association, vol. 86(4), pages 830-51, September.
  34. George Baker & Robert Gibbons & Kevin J. Murphy, 2002. "Relational Contracts and the Theory of the Firm," The Quarterly Journal of Economics, Oxford University Press, vol. 117(1), pages 39-84.
  35. P. Reny, 2010. "Common Belief and the Theory of Games with Perfect Information," Levine's Working Paper Archive 386, David K. Levine.
  36. Sugden, Robert, 1989. "Spontaneous Order," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 85-97, Fall.
  37. Carl Shapiro, 1983. "Premiums for High Quality Products as Returns to Reputations," The Quarterly Journal of Economics, Oxford University Press, vol. 98(4), pages 659-679.
  38. Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-41, August.
  39. Green, Edward J. & Porter, Robert H., 1982. "Noncooperative Collusion Under Imperfect Price Information," Working Papers 367, California Institute of Technology, Division of the Humanities and Social Sciences.
  40. Carmichael, H Lorne, 1989. "Self-Enforcing Contracts, Shirking, and Life Cycle Incentives," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 65-83, Fall.
  41. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  42. Michi Kandori, 2010. "Social Norms and Community Enforcement," Levine's Working Paper Archive 630, David K. Levine.
  43. Benoit, Jean-Pierre & Krishna, Vijay, 1985. "Finitely Repeated Games," Econometrica, Econometric Society, vol. 53(4), pages 905-22, July.
  44. Salant, David J., 1991. "A repeated game with finitely lived overlapping generations of players," Games and Economic Behavior, Elsevier, vol. 3(2), pages 244-259, May.
  45. Greif, Avner & Milgrom, Paul & Weingast, Barry R, 1994. "Coordination, Commitment, and Enforcement: The Case of the Merchant Guild," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 745-76, August.
  46. Clay, Karen, 1997. "Trade without Law: Private-Order Institutions in Mexican California," Journal of Law, Economics and Organization, Oxford University Press, vol. 13(1), pages 202-31, April.
  47. Carmichael, Lorne, 1985. "Can Unemployment Be Involuntary? Comment [Equilibrium Unemployment as a Worker Discipline Device]," American Economic Review, American Economic Association, vol. 75(5), pages 1213-14, December.
  48. Jean Tirole, 1999. "Incomplete Contracts: Where Do We Stand?," Econometrica, Econometric Society, vol. 67(4), pages 741-782, July.
  49. MacLeod, W Bentley & Malcomson, James M, 1989. "Implicit Contracts, Incentive Compatibility, and Involuntary Unemployment," Econometrica, Econometric Society, vol. 57(2), pages 447-80, March.
  50. Ramey Garey & Watson Joel, 2001. "Bilateral Trade and Opportunism in a Matching Market," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 1(1), pages 1-35, November.
  51. Bengt Holmström, 1999. "Managerial Incentive Problems: A Dynamic Perspective," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 169-182.
  52. Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April.
  53. Fudenberg, D., 1991. "Explaining Cooperatiob and Commitment in Repeated Games," Working papers 590, Massachusetts Institute of Technology (MIT), Department of Economics.
  54. Telser, L G, 1980. "A Theory of Self-enforcing Agreements," The Journal of Business, University of Chicago Press, vol. 53(1), pages 27-44, January.
  55. Spagnolo, Giancarlo, 1999. "Social relations and cooperation in organizations," Journal of Economic Behavior & Organization, Elsevier, vol. 38(1), pages 1-25, January.
  56. Vincenzo Scoppa, 2003. "The Role of Turnover Costs in the Enforcement of Performance-Related Pay Contracts," Metroeconomica, Wiley Blackwell, vol. 54(1), pages 60-78, 02.
  57. Bendor, Jonathan & Mookherjee, Dilip, 1990. "Norms, Third-Party Sanctions, and Cooperation," Journal of Law, Economics and Organization, Oxford University Press, vol. 6(1), pages 33-63, Spring.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:17284. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.