Centralized adjudicators solve trade by combining information storage with dispute resolution

Evidence

The institution that we model as the resolution of these problems is based on the presence of a specialized actor - a “judge” or “law merchant” (LM) who serves both as a repository of information and as an adjudicator of disputes. The core version of our model is based on the following assumptions. After any exchange, each party can accuse the other of cheating and appeal to the LM. Any dispute appealed to the LM is perfectly and honestly adjudicated at cost C to the plaintiff. — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 79

Categorization

• DEFINE: Defines the ‘law merchant’ institutional form that the model centers on.
• ADDENDUM: The law merchant as a reputation-information infrastructure parallels how my ‘trees as infrastructure’ piece treats root grafts and living-root bridges — physical/social infrastructure enabling otherwise-impossible transactions.
• XREF: connects to: Observable disputes in trade cannot be resolved without verification of the underlying claims — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 68; Trade institutions must solve both an information and a punishment-motivation problem; Markets can organize exchange without requiring high levels of trust (+8 more)

Related

• Trade institutions must solve both an information and a punishment-motivation problem (similarity 0.85)
• A private judge can solve collective punishment problems by centralizing information and adjudication. (similarity 0.85)

Broader Connections

• A Law Merchant institution can sustain honest trade as an equilibrium #corroborates (0.80) — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 95
• Mutual trust in iterated exchange is selffulfilling through aligned incentives #corroborates (0.75)
• Complementary agreements are self-enforcing through interdependence and focal points #expands (0.74) — Thomas C. Schelling, The Strategy of Conflict, 312
• Markets can organize exchange without requiring high levels of trust #corroborates (0.72)
• Colonial administrative decision-making consolidated conflicting local knowledge into packages #exemplifies (0.72)
• Protection substitutes for trust when trust is lacking in transactions #qualifies (0.72)