BOHNET, Iris <br/><br/>
More order with less law :  on contract enforcement, trust, and crowding 

 -  2001 
<br/><br/> Most contracts, whether between voters and politicians or between house owners and contractors, are incomplete. "More law" it  typically is assumed, increases the likelihood of contract performance  by increasing the probability of enforcement and/or the cost of breach. We examine a contractual relationship in which the first mover has to decide whether she wants to enter a contract without knowing whether the second mover will perform. We analyze how contract enforceability affects individual performance for exogenous preferences. Then we apply a dynamic model of preferece adaptation and find  that economic icentives have a nomonotonic effect on behavior. Individuals perform a contract when enforcement if strong or weak bytnot with medium enforcment probabilities: trustworthiness is "crowded in" with weak and "crowded out" with medium enforcment. In a laboratory experiment we test oru model`s implication an find support for the crowding predication. Our finding is in line with the recent work on the role of contract enforcement and trast in formley Communist coutries