Costly information is what breaks informal trade enforcement.
Evidence
We began our analysis by studying an environment in which private information about behavior in exchanges is a potential impediment to trade. Under complete information, even if meetings among particular pairs of traders are infrequent, informal norms of behavior are theoretically sufficient to police deviations. But when information is costly, the equilibrium may potentially break down and informal means may not be sufficient to police deviations. — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 163
Categorization
- XREF: Connects to the reader’s Gambetta private-protection markets frame: informal reputation works only where information is cheap, which limits the domain of trust-based enforcement. — connects to: Growing trade communities face monitoring and one-shot-cheating problems that demand new institutions. — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 26; Full-history information institutions are too costly for efficient trade — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 73; Costly information, not infrequent trade, is the core obstacle to honest exchange. — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 13 (+1 more)
Related
- Costly information, not infrequent trade, is the core obstacle to honest exchange. (similarity 0.90)
- Full-history information institutions are too costly for efficient trade (similarity 0.89)
- Institutions emerge where information is costly, not where enforcement is absent. (similarity 0.85)
- Reputation systems need cheap information flow, not frequent repeated trade, to enforce honesty. (similarity 0.85)
- Some enforcement costs are unavoidable for sustaining honest exchange. (similarity 0.83)
- Trustworthy behavior requires some information cost, but imperfect information can suffice. (similarity 0.83)
- Trade institutions must solve both an information and a punishment-motivation problem (similarity 0.80)
- Informal punishment fails because traders won’t boycott lucrative partners (similarity 0.80)
- Reputation systems fail because monitoring and sanctioning are costly public goods. (similarity 0.80)
- Long-distance trade undermines honest behavior among strangers without institutions. (similarity 0.80)
- Growing trade communities face monitoring and one-shot-cheating problems that demand new institutions. (similarity 0.79)
- Information about partners’ past behavior is essential for punishing cheaters. (similarity 0.78)
Broader Connections
- Costly information, not infrequent trade, is the core obstacle to honest exchange.
#corroborates(1.00) — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 13 - Trade institutions must solve both an information and a punishment-motivation problem
#expands(0.82)