Bilateral And Community Enforcement In A Networked Market With Simple Strategies
Source: Brown University
In many markets, successful execution of mutually beneficial economic transactions relies on informal contracts that are enforced by social pressure and reputation. Informal enforcement mechanisms include personal and community enforcement mechanisms. It is by now widely recognized that when transactions between two parties are sufficiently frequent, personal enforcement is highly effective. Community enforcement can overcome the limitations of personal enforcement when transactions between two parties are infrequent, yet transactions in the population are frequent.