On the Evolution of Collective Enforcement Institutions: Communities and Courts

44 Pages Posted: 5 Mar 2011 Last revised: 19 Jul 2016

Scott E. Masten

University of Michigan, Stephen M. Ross School of Business

Jens Prufer

Tilburg University - CentER; Tilburg University - Department of Economics; Tilburg University - Law and Economics Center (TILEC)

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Date Written: February 13, 2014

Abstract

We analyze the capacities of communities (or social networks) and courts to secure cooperation among heterogeneous, impersonal transactors. We find that communities and courts are complementary in that they tend to support cooperation for different types of transactions but that the existence of courts weakens the effectiveness of community enforcement. Our findings are consistent with the emergence of the medieval Law Merchant and its subsequent supersession by state courts as changes in the costs and risks of long-distance trade, driven in part by improvement in shipbuilding methods, altered the characteristics of merchant transactions over the course of the Commercial Revolution in Europe. We then contrast the European experience with the evolution of enforcement institutions in Asia over the same period.

Keywords: Institutions, Contract Enforcement, Communities, Courts, Social Networks, Law Merchant, Lex Mercatoria, Commercial Revolution

JEL Classification: D02, D71, N43, P48

Suggested Citation

Masten, Scott E. and Prufer, Jens, On the Evolution of Collective Enforcement Institutions: Communities and Courts (February 13, 2014). TILEC Discussion Paper No. 2011-017; U of Michigan Law & Econ, Empirical Legal Studies Center Paper No. 11-013. Available at SSRN: https://ssrn.com/abstract=1773486 or http://dx.doi.org/10.2139/ssrn.1773486

Scott E. Masten (Contact Author)

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
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734-764-1389 (Phone)
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Jens Prufer

Tilburg University - CentER ( email )

P.O. Box 90153
Tilburg, DC 5000 LE
Netherlands

Tilburg University - Department of Economics ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Tilburg University - Law and Economics Center (TILEC) ( email )

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Tilburg, 5000 LE
Netherlands

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