Some enforcement costs are unavoidable for sustaining honest exchange.

Evidence

What we can say confidently is that the kind of costs incurred by the LM system are inevitable if Honest trade is to be sustained in the face of self-interested behavior and that the system seems well designed to keep those costs as low as possible. — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 137

Categorization

• XREF: Directly parallels Milgrom, North & Weingast’s account of private judges and the minimal-cost claim: the LM institution is the cheapest feasible way to sustain cooperative trade. — connects to: Word-of-mouth reputation alone cannot sustain honest trade. — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 38; Long-distance trade undermines honest behavior among strangers without institutions. — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 66; The mere threat of dispute costs can deter cheating without real costs being paid. — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 130 (+4 more)

Related

• Long-distance trade undermines honest behavior among strangers without institutions. (similarity 0.86)
• Costly information is what breaks informal trade enforcement. (similarity 0.83)
• Costly information, not infrequent trade, is the core obstacle to honest exchange. (similarity 0.83)
• Word-of-mouth reputation alone cannot sustain honest trade. (similarity 0.82)
• Private enforcement institutions restore cooperation but impose priced transaction costs. (similarity 0.82)
• Private-judge trading systems succeed only when enforcement costs stay low (similarity 0.82)
• Long-distance trade needs institutions to fill knowledge gaps about others’ honesty (similarity 0.82)
• The mere threat of dispute costs can deter cheating without real costs being paid. (similarity 0.81)
• Sustained long-distance trade requires that reneging on agreements be unprofitable. (similarity 0.81)
• Cooperation can survive even when cheating pays seven times more per round. (similarity 0.80)
• Reputation systems need cheap information flow, not frequent repeated trade, to enforce honesty. (similarity 0.80)
• Private trade-enforcement systems fail when wealth transfer is costly (similarity 0.79)
• Full-history information institutions are too costly for efficient trade (similarity 0.79)
• Trade institutions must solve both an information and a punishment-motivation problem (similarity 0.79)
• Reputation systems fail because monitoring and sanctioning are costly public goods. (similarity 0.78)

Broader Connections

• Costly information, not infrequent trade, is the core obstacle to honest exchange. #qualifies (0.75) — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 13
• Transaction costs comprise negotiation, adaptation, and enforcement expenses that models ignore #qualifies (0.75)
• Without legal enforcement or reputation audiences, some bargains become impossible #responds-to (0.72) — Thomas C. Schelling, The Strategy of Conflict, 115
• Sustained long-distance trade requires that reneging on agreements be unprofitable. #expands (0.72) — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 167