Lex mercatoria or Law Merchant (‘LM’) is said to be the self-made law of international commerce. According to its proponents, LM is an autonomous legal order that not only supplements state commercial law, but works as a substitute for it. The ‘ancient’ LM, which accompanied the...

We study the role of contract enforcement in shaping the dynamics of international trade at the firm level. We develop a theoretical model to describe how agents build reputations to overcome the problems created by weak enforcement of international contracts. We find that, all else equal,...

Weak enforcement of international contracts can substantially reduce international trade. We develop a model where agents build reputations to overcome the difficulties that this institutional failure causes in a context of incomplete information. The model describes the interplay between...

We study how barriers to competition - such as, restrictions to business start-up and strict enforcement of covenants or IPR - affect the investment in knowledge capital when contracts are not enforceable. These barriers lower the competition for human capital and reduce the incentive to...

There is substantially more trade within national borders than across borders. An important explanation for this fact is the weak enforcement of international contracts. We develop a model in which agents build reputations to overcome this institutional failure. The model describes the interplay...

Commerce always requires an institutional embedment. Basically, private Institutions as well as state institutions can provide the normative good of legal certainty understood as the enforceability of contractual commitments. While for domestic commerce, the balance between the importance of...

Weak enforcement of international contracts can substantially reduce international trade. We develop a model where agents build reputations to overcome the difficulties that this institutional failure causes in a context of incomplete information. The model describes the interplay between...

This paper examines the role of contracting institutions on a multinational firm's optimal ownership strategy. We develop a model in which both a multinational firm and its local joint venture partner can ex post engage in costly rent-seeking actions to increase their ex ante agreed upon revenue...

In theory, property rights allow markets to achieve Pareto optimal allocations. But the literature on contracting largely ignores what happens when property rights are imperfectly defined and enforced. Although some models include weak enforcement or poorly defined rights or "anticommons," this...

This paper examines the role of contracting institutions on a multinational firm's optimal ownership strategy. We develop a model in which both a multinational firm and its local joint venture partner can ex post engage in costly rent-seeking actions to increase their ex ante agreed upon revenue...