Econometrica

Journal Of The Econometric Society

An International Society for the Advancement of Economic
Theory in its Relation to Statistics and Mathematics

Edited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262

Econometrica: Mar, 2003, Volume 71, Issue 2

On Modes of Economic Governance

https://doi.org/10.1111/1468-0262.00415
p. 449-481

Avinash Dixit

I consider transactions involving asymmetric prisoners’ dilemmas between pairs of players randomly selected from two large populations. Games are played repeatedly, but information about cheating is not adequate to sustain cooperation, and there is no official legal system of contract enforcement. I examine how profit–maximizing private intermediation can supply the information and enforcement. I obtain conditions under which private governance can improve upon no governance, and examine why it fails to achieve social optimality.


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