TY  - JOUR
AU  - Anderson,James E.
AU  - Young,Leslie
TI  - Imperfect Contract Enforcement
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8847
PY  - 2002
Y2  - March 2002
UR  - http://www.nber.org/papers/w8847
L1  - http://www.nber.org/papers/w8847.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  - We model imperfect contract enforcement when repudiators and their victims default to spot trading. The interaction between the contract and spot markets under improved enforcement can exacerbate repudiation and reduce contract execution, harming all traders. Improved contract execution benefits traders on the excess side of the spot market by attracting potential counter-parties, but harms them by impeding their exit from contracts found to be unfavorable. Multiple equilibria and multiple optima are possible, with anarchy a local optimum, perfect enforcement a local minimum and imperfect enforcement a global optimum. LDCs exhibit parameter combinations such that imperfect enforcement is optimal from their side of international markets. The model thus rationalizes the internationally varying patterns of imperfect enforceability observable in survey data.
ER  -