Efficiency under contractual incompleteness often requires voluntary cooperation in situations where self-regarding incentives for contractual compliance are present as well. Here we provide a comprehensive experimental analysis based on the gift-exchange game of how explicit and implicit incentives affect cooperation. We first show that there is substantial cooperation under non-incentive comp...

This paper revisits the hypothesis that nonprofit organizations emerge in markets that are characterized by contractual incompleteness because they ensure consumers against opportunistic behavior. We extend the Glaeser and Shleifer (2001) framework which studies an entrepreneur’s optimal choice of organizational form and service quality when quality is noncontractible into a repeated interactio...

This paper analyses the determinants of outward processing (OP) trade; specifically, imports of intermediates subsequent to processing abroad. A model where firms choose between OP and importing intermediates directly from a third country (generic offshoring, GO) predicts higher tariffs, lower monitoring costs and higher quality make OP more likely, while better institutions and rule of law abr...

Electronic institutions are software frameworks integrating normative environments where agents interact to create mutual commitments. Contracts are formalizations of business commitments among groups of agents, and comprise a set of applicable norms. An electronic institution acts as a trusted third-party that monitors contract compliance, by integrating in its normative environment the contra...