Tilburg Law and Economics Center

Workshop Economic Governance and Competition



TILEC logo KNAW logo


The Tilburg Law and Economics Center (TILEC) organizes a workshop, financially supported by the KNAW (Royal Netherlands Academy of Arts and Sciences) on

'Economic Governance and Competition:
The Pros and Cons of Private Ordering in the Shadow of the Law'


Thursday, 30 September and Friday, 1 October 2010
De Harmonie, Stationsstraat 26, 5038 ED Tilburg


  • Programme DOWNLOAD PDF>>
  • Location
  • Registration
  • Information


    Invited speakers


    Lisa Bernstein (University of Chicago)
    Avinash Dixit (Princeton University)
    Robert Gibbons (MIT)
    Bentley MacLeod (Columbia University)


    Scientific Background


    The 2009 Nobel Prize in Economics was awarded to Elinor Ostrom and Oliver Williamson for their contributions to our understanding of economic governance. Avinash Dixit (2009, AER) defined economic governance as "the structure and functioning of the legal and social institutions that support economic activity and economic transactions by protecting property rights, enforcing contracts, and taking collective action to provide physical and organizational infrastructure."

    Many transactions in all kinds of industries are characterized by some degree of contractual incompleteness, that is, it is impossible for the parties involved to write a complete contract covering all potential outcomes that may arise during the relationship. Contractual incompleteness can explain why even in developed economies many transactions take place without explicit or implicit support from the judiciary. Other reasons include corrupt, expensive, unqualified, or unreliable courts. Moreover, many transactions take place within firms, families, clans, or other close-knit communities who may prefer not to get a public court involved in their internal business. As a consequence, "most disputes, including those that under current rules could be brought to a court, are resolved by avoidance, self-help, and the like", according to Oliver Williamson (2005, AER).

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    If public courts are de facto absent, it may be possible to exploit this gap and to violate others' property rights and joint contracts, or to sabotage collective action. Nevertheless, actors often do not behave opportunistically and instead honor agreements, respect property rights, and contribute to public goods. What explains this behavior? Social preferences or bounded rationality offer two answers that are grounded in psychology. But even if actors have standard preferences and are fully rational, they may forego short-term utility maximization and thereby increase efficiency. The explanation is rooted in the specific governance regime that supports an economic activity. Social networks, business and trade associations, clans, private arbitration and mediation, consortia and syndicates, credit bureaus, and other formal and informal institutions and organizations have been developed in all economies to support economic activities for which public courts are de facto unavailable. Dixit (2004) wrote about "private ordering in the shadow of the law". Williamson (2005) commented, "the upshot [of ineffective courts] is that private ordering is central to the performance of an economy whatever the conditions of lawfulness."

    This positive view of private governance mechanisms stands in contrast to the view of a large literature in industrial organization that goes back at least to Nelson (1922) and was recently promoted, amongst others, by Marshall et al. (2007, IJIO) and Roller and Steen (2006, AER). That literature underlines the negative aspects of private governance mechanisms for the working of markets. The key argument brought forward is that institutions such as trade associations or business networks offer a platform for competitors to coordinate behavior and to collude to the detriment of consumers.

    This workshop aims to bring scholars together who have studied organizations and institutions that support economic activities if using the courts is not an option. The workshop will also provide a competition policy perspective that critically weighs the pros and cons of self-governance institutions against each other.

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    Specific Topics (non-exclusive)


    • Under which conditions can private ordering replace public courts? What are the main benefits and the main costs associated with this substitution?
    • Should private institutions step in if the public court system fails? Who should set them up and who should pay for them?
    • What are the effects on private ordering if the quality of the legal system improves or decreases? What about the risk of crowding out?
    • How does the efficient private institution or organization that supports transactions depend on the characteristics of the transaction, the industry, or the country?
    • How can the efficiency of governance regimes be measured if both the market creation effect and the market shrinking effect that comes with private ordering are taken care of?
    • Can we formulate rules of thumb that help competiton authorities and courts to decide when the threat of collusion inherent in a self-governance mechanism outweighs its positive effects, or vice versa?
    • What can we learn from cases where private ordering is part of a regulated process, e.g. in industrial relations where trade unions are a substitute for labor courts, to some extent?

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    Programme (preliminary)


    Thursday, 30 September 2010

    8.45 - 9.15 Registration
    9.15 - 9.30 Welcome adress
    9.30 - 10.30

    Avinash Dixit (Princeton University)

    'Relation-based Governance and Competition'

    10.30-11.00 Coffee break
    11.00 - 12.00

    Dean Williamson (US Department of Justice)

    'The Financial Structure of Commercial Revolution: Financing Long-distance Trade in Venice 1190-1220 and Venetian Crete 1278-1400'

    Discussant: Thorsten Beck (Tilburg University)

    12.00-13.00

    Scott Masten (University of Michigan) and
    Jens Prüfer (Tilburg University)

    'On the Evolution of Collective Enforcement Institutions: Communities and Courts'

    Discussant: Avinash Dixit (Princeton University)

    13.00 -14.00 Lunch
    14.00-15.00

    Robert Gibbons (MIT)

    'Relational Contracts and the Origins of Organizational Capability'

    15.00-15.30 Coffee break
    16.30-17.30

    Giacomo Calzolari (University of Bologna) and Giancarlo Spagnolo (University of Rome 'Tor Vergata')

    'Relational Contracts and Competitive Screening'


    Discussant: Bentley MacLeod (Columbia University)

    16.30-17.30

    Samuel Lee (New York University) and
    Petra Persson (Columbia University)

    'Authority versus Loyalty: Social Incentives and Modes of Governance'

    Discussant: Giancarlo Spagnolo (University of Rome 'Tor Vergata')

    Friday, 1 October 2010

    9.30-10.30

    Lisa Bernstein (University of Chicago)

    'The Limits of Private Ordering'

    10.30-11.00 Coffee break
    11.00-12.00

    Stefan Voigt (University of Hamburg)

    'Does Arbitration Blossom when State Courts are Bad?'

    Discussant: Lisa Bernstein (University of Chicago)

    12.00-13.00

    Claude Menard and
    Emmanuel Raynaud (University of Paris, Pantheon-Sorbonne)

    'Ulysses and the Sirens: Commitment and Control in Hybrid Forms'

    Discussant: Dean Williamson (US Department of Justice)

    13.00 -14.00 Lunch
    14.00-15.00

    Bentley MacLeod (Columbia University)

    'Great Expectations: Law, Employment Contracts, and Labor Market Performance'

    15.00-15.30 Coffee break
    15.30-16.30

    Edward Morse and
    Vasant Raval (Creighton University)

    'Private Ordering in Light of the Law: Achieving Consumer Protection through Payment Card Security Measures'

    Discussant: Péter Cserne (Tilburg University)

    16.30-17.30

    Giorgio Zanarone (Colegio Universitario de Estudios Financieros)

    'Contract Adaptation under Legal Constraints'

    Discussant: Eric van Damme (Tilburg University)

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    Scientific committee


    Maurits Barendrecht (Tilburg University)
    Péter Cserne (Tilburg University)
    Eric van Damme (Tilburg University)
    Lapo Filistrucchi Tilburg University)
    Pierre Larouche (Tilburg University)
    Scott Masten (University of Michigan)
    Wieland Müller (Tilburg University)
    Jens Prüfer (Tilburg University)

     

    Practical Information

    Format
    The workshop will take place from 30 September - 1 October 2010 and is planned for two full days. Regular presentations (30 minutes) will be followed by a discussant (10 minutes) and public discussion (20 minutes). For keynote speakers, the format will be 45 minutes presentation and 15 minutes public discussion. There will be plenty of time for informal discussion and social interaction.

    Location
    De Harmonie, Stationsstraat 26, 5038 ED Tilburg
    Map to location

    Reimbursement policy
    TILEC will cover the accommodation and travel expenses of speakers and the accommodation expenses of discussants.

    Important dates
    The Call for Papers is closed now.
    Sorry, papers cannot be submitted anymore.
    The deadline for submissions was May 16, 2010.
    Papers should be submitted in PDF format to TILECgovernance@uvt.nl.
    Long abstracts are accepted but full papers are preferred.
    In case of questions, please contact the workshop organizer (see below).
    Authors of accepted papers will be notified by June 30, 2010.
    Speakers might be asked to discuss a paper.
    Completed drafts of accepted papers are due by August 31, 2010
    and will be made available for download on the conference website.

    Registration
    More info TBA

    Information
    Tilburg University
    TILEC Secretariat
    PO Box 90153
    5000 LE Tilburg
    E-mail: tilec@uvt.nl
    Tel.: +31-13-466 8789

    Organizer
    Jens Prüfer (Tilburg University), j.prufer@uvt.nl

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