The paper reconsiders an old question in law and economics: will firms prefer to rely on legal sanctions or market sanctions as a means of committing to provide high quality goods? In the model, legal sanctions are expensive to deploy because of litigation costs, whereas market sanctions are...

What role do contracts play in long-term relationships? Very little, if any, according to the relational contract literature. It is not the contract that induces promise-keeping but the imposition of (or threat of imposing) relational or informal sanctions, such as suspension or termination of...