Contractual Intermediaries

UCSD Economics Discussion Paper 97-26

39 Pages Posted: 20 Feb 1998

See all articles by Garey Ramey

Garey Ramey

University of California, San Diego (UCSD) - Department of Economics

Joel Watson

University of California, San Diego (UCSD) - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: August 1999

Abstract

This paper analyzes the role of third party intermediaries, such as courts and arbitrators, in contract enforcement. In our model, intermediaries compel contracted transfers and resolve disputes when requested to do so by the contracting agents. When the verifiability of information is limited, successful enforcement requires that dispute resolution costs be sufficiently great. Optimal enforcement systems economize on dispute resolution and information costs, and may involve establishment of specific systems tailored to particular groups. We show further that the "holdup problem" may be resolved via an appropriately designed dispute resolution system.

JEL Classification: D80, K40, C70

Suggested Citation

Ramey, Garey and Watson, Joel, Contractual Intermediaries (August 1999). UCSD Economics Discussion Paper 97-26. Available at SSRN: https://ssrn.com/abstract=60828 or http://dx.doi.org/10.2139/ssrn.60828

Garey Ramey (Contact Author)

University of California, San Diego (UCSD) - Department of Economics ( email )

9500 Gilman Drive
La Jolla, CA 92093-0508
United States
858-534-5721 (Phone)
858-534-7040 (Fax)

Joel Watson

University of California, San Diego (UCSD) - Department of Economics ( email )

9500 Gilman Drive
La Jolla, CA 92093-0508
United States
858-534-6132 (Phone)
619-534-7040 (Fax)

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