TY  - RPRT
        AU  - MacLeod, W. Bentley
        TI  - Reputations, Relationships and the Enforcement of Incomplete Contracts
        PY  - 2006/Feb/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 1978
        UR  - https://www.iza.org/index.php/publications/dp1978
        AB  - This paper discusses the literature on the enforcement of incomplete contracts. It compares legal enforcement to enforcement via relationships and reputations. A number of mechanisms, such as the repeat purchase mechanism (Klein and Leffler (1981)) and efficiency wages (Shapiro and Stiglitz (1984)), have been offered as solutions to the problem of enforcing an incomplete contract. It is shown that the efficiency of these solutions is very sensitive to the characteristics of the good or service exchanged. In general, neither the repeat purchase mechanism nor efficiency wages is the most efficient in the set of possible relational contracts. In many situations, total output may be increased through the use of performance pay and through increasing the quality of law.
        KW  - institutional economics
KW  - transactions costs
KW  - incomplete contracts
KW  - repeated games
KW  - reputation
KW  - law and economics
KW  - contract
KW  - contract enforcement
        ER  -