Arruñada, BenitoCasari, MarcoUniversitat Pompeu Fabra. Departament d'Economia i Empresa2017-07-262017-07-262007-04-01Journal of Economic Behavior and Organization, Forthcominghttp://hdl.handle.net/10230/649Contract enforcement does not only affect single transactions but the market as a whole. We compare alternative institutions that allocate enforcement rights to the different parties to a credit transaction: either lenders, borrowers, or judges. Despite all parties having incentives to enforce and transact, the market flourishes or disappears depending on the treatment: paying judges according to lenders' votes maximizes total surplus and equity; and a similar result appears when judges are paid according to average earnings in society. In contrast, paying judges according to borrowers' votes generates the poorest and most unequal society. These results suggest that parties playing the role of borrowers understand poorly the systemic consequences of their decisions, triggering under-enforcement, and hence wasting profitable trade opportunities.application/pdfengL'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commonsinfo:eu-repo/semantics/workingPaperimpersonal exchangethird-party enforcementsteps of reasoningother-regarding preferencesjudicial independence.Behavioral and Experimental EconomicsBusiness Economics and Industrial Organizationinfo:eu-repo/semantics/openAccess