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The Emergence of Enforcement

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  • Anderlini, L.
  • Felli, L.
  • Piccone, M.

Abstract

We ask how enforcement can endogenously emerge in a landscape in which only raw power, iron fist, govern the interaction of agents. If two agents are ranked in terms of power, the more powerful one can expropriate, at a cost, the less powerful one. Alternatively, both agents can engage in surplus-augmenting cooperation (e.g. trade). If expropriation is not too costly and cooperation is not overwhelmingly productive, for any pair of ranked agents the possibility of expropriation prevents cooperation. The more powerful agent finds it profitable to expropriate the less powerful one. However, if expropriating agents who are net expropriators of others is cheaper, then a more powerful agent may endogenously become an "enforcer" for lower ranked agents. In equilibrium, the more powerful agent expropriates the less powerful ones by smaller amounts, and the less powerful ones cooperate and refrain from expropriating agents below them. This is because if they do not the more powerful agent will find it cheaper to expropriate only them by a larger amount. Surprisingly, the details of the power structure are irrelevant for enforcement to emerge as an equilibrium phenomenon provided that the original jungle is inhabited by a sufficiently large number of agents and by one that dominates all others.

Suggested Citation

  • Anderlini, L. & Felli, L. & Piccone, M., 2022. "The Emergence of Enforcement," Cambridge Working Papers in Economics 2250, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:2250
    Note: lf454
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    More about this item

    Keywords

    Enforcement; Jungle; Power Structures; Rule of Law;
    All these keywords.

    JEL classification:

    • C79 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Other
    • D00 - Microeconomics - - General - - - General
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • K19 - Law and Economics - - Basic Areas of Law - - - Other
    • K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General
    • K49 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Other

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