UCL logo

UCL Discovery

UCL home » Library Services » Electronic resources » UCL Discovery

More order with less law: on contract enforcement, trust, and crowding

Huck, S; Bohnet, I; Frey, BS; (2001) More order with less law: on contract enforcement, trust, and crowding. American Political Science Review , 95 (1) 131 - 144. 10.1017/S0003055401000211. Green open access

[img] PDF
3117633.pdf
Available under License : See the attached licence file.

Download (579kB)

Abstract

Most contracts, whether between voters and politicians or between house owners and contractors, are incomplete. “More law,” it typically is assumed, increases the likelihood of contract performance by increasing the probability of enforcement and/or the cost of breach. We examine a contractual relationship in which the first mover has to decide whether she wants to enter a contract without knowing whether the second mover will perform. We analyze how contract enforceability affects individual performance for exogenous preferences. Then we apply a dynamic model of preference adaptation and find that economic incentives have a nonmonotonic effect on behavior. Individuals perform a contract when enforcement is strong or weak but not with medium enforcement probabilities: Trustworthiness is “crowded in” with weak and “crowded out” with medium enforcement. In a laboratory experiment we test our model’s implications and find support for the crowding prediction. Our finding is in line with the recent work on the role of contract enforcement and trust in formerly Communist countries.

Type: Article
Title: More order with less law: on contract enforcement, trust, and crowding
Open access status: An open access version is available from UCL Discovery
DOI: 10.1017/S0003055401000211
Publisher version: http://dx.doi.org/10.1017/S0003055401000211
Language: English
Additional information: Copyright © 2001 by the American Political Science Association
Keywords: contracts, law, trust
UCL classification: UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of SandHS > Dept of Economics
URI: http://discovery.ucl.ac.uk/id/eprint/12709
Downloads since deposit
1,055Downloads
Download activity - last month
Download activity - last 12 months
Downloads by country - last 12 months

Archive Staff Only

View Item View Item