Drawing on a new analytical framework provided by the economic theory of optimal legal areas, this paper identifies the factors determining the optimal size of the European Union. It applies this theory to the question of how enlargement affects the welfare of the current and the new members of...

In this paper we analyze whether trust can overcome the contractual hazards caused by the territoriality of law, how effective trust is and what the impact is on the sequential structure of trade. The paper contributes to the New Institutional Economics of International Transactions (NIEIT).

Drawing on Transaction Costs Economics, this paper develops a new approach to conflict of law rules. It outlines a concept of constitutional uncertainty in international trade and presents a model of international transactions in the presence of a diversity of legal orders. We develop a general...

The paper analyzes the effects of different litigation cost allocation rules, detection skill of judges (judicial errors), and the mode of enforcement of foreign judgments on the home bias in trade and sheds a new light on the so-called border-effect puzzle. In our model the border effect or...