Full-history information institutions are too costly for efficient trade
Evidence
With limited information about the past behavior of trading partners and no institution to compensate, there are no incentives for honest behavior. It is evident that incentives could be restored by introducing an institution that provides full information to each trader about how each other has behaved. Such an institution, however, would be costly to operate. Moreover, efficient trade does not require that every trader know the full history of the behavior of each other trader. — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 73
Categorization
- XREF: Connects to Gambetta’s private protection markets: the Mafia’s power rests on controlling reputation information more cheaply than full transparency. — connects to: Full information about all traders’ histories is costly and unnecessary for efficient trade; Trade institutions must solve both an information and a punishment-motivation problem; Costly information is what breaks informal trade enforcement. — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 163 (+4 more)
Broader Connections
- Full information about all traders’ histories is costly and unnecessary for efficient trade
#corroborates(0.98) - Costly information, not infrequent trade, is the core obstacle to honest exchange.
#corroborates(0.90) — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 13 - Costly information is what breaks informal trade enforcement.
#expands(0.85) — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 163 - Trade institutions must solve both an information and a punishment-motivation problem
#expands(0.82) - Centralized adjudicators solve trade by combining information storage with dispute resolution
#contradicts(0.80) — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 79 - Long-distance trade needs institutions to fill knowledge gaps about others’ honesty
#expands(0.78) - Intermediaries reduce reputational information costs in extralegal markets.
#complicates(0.75) — Lisa Bernestein, Opting out of the Legal System, 133