Governance, Trade, and Investment *

Abstract

Imperfections in the rule of law create new problems of contractibility, in addition to the familiar one of unverifiability of information. Alternative social institutions for governance of property and contract arise but are also imperfect, and can interact well or poorly with the formal state institutions. Security of property and contract is especially problematic for foreign traders and investors. This paper considers some theoretical analysis of such situations. The game-theoretic ideas and methods range from simple two-stage games with strategic moves, to bilateral and multilateral repeated games with added issues of asymmetric information and imperfect communication. Address of author: Avinash Dixit, Department of Economics, Princeton University, Princeton, NJ 08544–1021, USA. Phone: 609-258-4013. Fax: 609-258-6419. E-mail: dixitak@princeton.edu Web: http://www.princeton.edu/ ̃ dixitak/home ∗This is a slightly revised version of a paper presented at the mini-workshop on “Applications of Game Theory in Trade and Development,” at the Game Theory Society’s 2011 Summer Festival, Stony Brook, July 19–20. I thank the participants for perceptive comments. I also thank Nuffield College, Oxford for its hospitality when the first draft of the paper was written.

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Cite this paper

@inproceedings{Dixit2011GovernanceTA, title={Governance, Trade, and Investment *}, author={Avinash Dixit}, year={2011} }