TY  - JOUR
AU  - Anderson,James E.
AU  - Young,Leslie
TI  - Trade Implies Law: The Power of the Weak
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7702
PY  - 2000
Y2  - May 2000
UR  - http://www.nber.org/papers/w7702
L1  - http://www.nber.org/papers/w7702.pdf
N1  - Author contact info:
James E. Anderson
Department of Economics
Boston College
Chestnut Hill, MA 02467
Tel: 617/552-3691
Fax: 617/552-2308
E-Mail: james.anderson.1@bc.edu

Leslie Young
The Chinese University of Hong Kong
E-Mail: leslie@baf.msmail.cuhk.edu.hk
AB  - Without the rule of law, traders who incur trading costs can be held up by counter-parties who are stronger in anarchic bargaining.  The favourable terms which the latter extract can overcrowd that side of the market, dissipating the benefits.  We establish plausible necessary and sufficient conditions for a move from anarchy toward the rule of law to benefit all traders. The rule of law might be delayed, not only by the difficulties of setting up legal institutions, but by monopolistic traders that have meantime emerged to address the inefficiencies of anarchic trade.  These monopolistic traders must also guarantee atomistic traders against holdup.
ER  -