Document Type
Discussion Paper
Publication Date
9-1-1999
CFDP Number
1235
CFDP Pages
38
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.
Recommended Citation
Ramey, Garey and Watson, Joel, "Contractual Intermediaries" (1999). Cowles Foundation Discussion Papers. 1484.
https://elischolar.library.yale.edu/cowles-discussion-paper-series/1484