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

The Economics of Relationships and the Limits of the Law

Listed author(s):
  • James W. Bowers

    (Louisiana State University Law Center)

  • John P. Bigelow

    (Louisiana State University, Economics Dept.)

Registered author(s):

    In this study we model "close-knit" human relations in order to explain the empirical findings of social scientists that law does not affect behaviors occurring within such relationships. We show that parties face significant strategic obstacles in forming relationships, and suggest how they can overcome those obstacles. Once an efficient relationship forms, however, our model confronts the standard finding that relational equilibria are too numerous to permit the drawing of very precise conclusions about behaviors that can be expected to occur within close relationships. To meet that difficulty, we propose that a large class of strategic relational equilibria which we denote as "unilaterally inefficient" are implausible and suggest that parties can be expected to follow relational strategies which do not produce them. Those strategies we define as "value-oriented." By restricting our attention to equilibria produced by relational interactions using value oriented strategies, we show that in on-going relationships, exogenous legal entitlements will never be resorted to unless the relationship is no longer efficient, in which case exogenous law ought to terminate it. We discuss several legal fields in which legal relationships might likely resemble the economic relationships we model, and show that the structure of traditional legal doctrine is consistent with the predictions generated by our model. The law does not attempt to intervene in ongoing relationships except to terminate them. Our analysis also shows, however, that the absence of legal entitlements is roughly coextensive with environments in which self-help is most likely to be an effective substitute for overcoming whatever collective action problem legal doctrine might have otherwise been called upon to address.

    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: http://econwpa.repec.org/eps/le/papers/9607/9607001.zip
    Download Restriction: no

    File URL: http://econwpa.repec.org/eps/le/papers/9607/9607001.pdf
    Download Restriction: no

    File URL: http://econwpa.repec.org/eps/le/papers/9607/9607001.ps.gz
    Download Restriction: no

    Paper provided by EconWPA in its series Law and Economics with number 9607001.

    as
    in new window

    Length: 43 pages
    Date of creation: 13 Jul 1996
    Handle: RePEc:wpa:wuwple:9607001
    Note: 43 pages, WordPerfect document and graphics(15), InfoZipped.
    Contact details of provider: Web page: http://econwpa.repec.org

    No references listed on IDEAS
    You can help add them by filling out this form.

    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:wpa:wuwple:9607001. 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: (EconWPA)

    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.