Making Deals with Peppe

نویسنده

  • Tibor Neugebauer
چکیده

This paper considers transactions involving Prisoners’ Dilemmas with an outside option. In the unique subgame perfect equilibrium of the game no interaction takes place. Since there is no official legal system of contract enforcement cooperation cannot be obtained. Intermediation offers adequate information and/or enforcement to crowd out defectors and to yield social optimality. An experiment provides evidence for a significant increase of market activity and cooperation due to the existence of private intermediation. Without the supply of enforcement services, however, the social gains of private intermediation are comparably low. JEL Classifications: C90

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تاریخ انتشار 2004