On the Evolution of Collective Enforcement Institutions: Communities and Courts

Ross School of Business Paper No. 1169

CentER Discussion Paper No. 2011-074

44 Pages Posted: 30 Jun 2011 Last revised: 8 Apr 2014

See all articles by Scott E. Masten

Scott E. Masten

University of Michigan, Stephen M. Ross School of Business

Jens Prufer

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

Multiple version iconThere are 2 versions of this paper

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). Ross School of Business Paper No. 1169, CentER Discussion Paper No. 2011-074, Available at SSRN: https://ssrn.com/abstract=1874694 or http://dx.doi.org/10.2139/ssrn.1874694

Scott E. Masten

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

701 Tappan Street
Ann Arbor, MI MI 48109
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Jens Prufer (Contact Author)

Tilburg University ( email )

P.O. Box 90153
Tilburg, DC Noord-Brabant 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 )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

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