We use economic experiments to investigate how different contract enforcement regimes affect efficiency and the distribution of surplus in vertically coordinated markets where contractors have market power. We find that if a third party (e.g. government) provides full enforcement of contracts, social efficiency is enhanced. Surprisingly, we find when enforcement is completely absent, social eff...

Private-order market institutions founded on trust-based relational contracts suffer adverse selection and moral hazard problems, while public-order market institutions have a limited capacity to enforce contracts. We model agent selection between contract enforcement institutions and demonstrate that the state’s contract enforcement capacity is complementary to private-order contract enforceme...

This paper studies the link between enforcement in financial contracts and output volatility. In particular we study how cycles and importantly recessions can be amplified in economies with weak contract enforcement. The idea of the paper is that firms in economies with enforcement problems will not be able to have the optimal scale of production because investors cannot enforce the collection ...

This paper examines the development of legal contract enforcement in a political economy context. The key insight is that, in earlier times when relational contracts are used predominantly, the rich elite agents must have enjoyed comparative advantages in using relational contracts than the poor and thus would bene…t less from investing in legal enforcement. The paper …nds that high income ineq...

one of the non- judicial enforcements which is addressed by some legal systems in order to preserving rights of a contracting party against breach of obligation of other party, is the right for sale of goods in self-help type by the damaged party .this enforcements was predicted and addressed in both vienna convention for international sale of goods and iranian legal system. but it is still unk...

This Article studies the relationship between formal and informal contract enforcement. The theoretical literature treats the two strategies as separate phenomena. By contrast, a rich experimental literature considers whether the introduction of formal contracting and state enforcement “crowds out” the operation of informal contracting. Both literatures focus too narrowly on how formal contract...