Book contents
- Frontmatter
- Contents
- Contributors
- Introduction by the Editors
- Advances in Economics and Econometrics
- 1 The Economics of Social Networks
- 2 Multi-Contracting Mechanism Design
- 3 Allocative and Informational Externalities in Auctions and Related Mechanisms
- 4 The Economics of Relationships
- 5 Information in Mechanism Design
- 6 Communication in Economic Mechanisms
- 7 Advances in Dynamic Optimal Taxation
- 8 Quantitative Macroeconomic Models with Heterogeneous Agents
- 9 Modeling Inefficient Institutions
- 10 Whither Political Economy? Theories, Facts and Issues
- 11 Comments on Acemoglu and Merlo
- Index
- Titles in the series
4 - The Economics of Relationships
Published online by Cambridge University Press: 05 January 2013
- Frontmatter
- Contents
- Contributors
- Introduction by the Editors
- Advances in Economics and Econometrics
- 1 The Economics of Social Networks
- 2 Multi-Contracting Mechanism Design
- 3 Allocative and Informational Externalities in Auctions and Related Mechanisms
- 4 The Economics of Relationships
- 5 Information in Mechanism Design
- 6 Communication in Economic Mechanisms
- 7 Advances in Dynamic Optimal Taxation
- 8 Quantitative Macroeconomic Models with Heterogeneous Agents
- 9 Modeling Inefficient Institutions
- 10 Whither Political Economy? Theories, Facts and Issues
- 11 Comments on Acemoglu and Merlo
- Index
- Titles in the series
Summary
INTRODUCTION
Relationships: Two Illustrations
Each year, about $60 billion dollars worth of diamond jewelry is sold worldwide. Over the course of its journey from mine to warbrobe, a diamond typically passes through numerous intermediaries in search of just the right buyer. Because diamonds are easy to conceal, difficult to distinguish, portable and valuable, there are many opportunities to cheat on diamond deals. One would accordingly expect them to be handled with the utmost care. To the contrary, virtually no care at all is taken:
Once gems leave the vault-like workshops, they do so in folded sheets of tissue paper, in the pockets of messengers, dealers and traders. They are not logged in and out … or marked to prevent substitution. They are protected from embezzling only by the character of those who transport. … On that slender record, gems worth thousands of dollars traverse the street and are distributed among buyers from Bombay to Buenos Aries, Pawtucket and Dubuque.
In Puccini's opera Gianni Schicchi, the deceased Buoso Donati has left his estate to a monastery, much to the consternation of his family. Before others learn of the death, Donati's relatives hire the actor Gianni Schicchi, who is to impersonate Buoso Donati, write a new will leaving the fortune to the family, and then feign death. Anxious that Schicchi do nothing to expose the plot, the family explains that there are severe penalties for tampering with a will and that any misstep puts Schicchi at risk.
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- Information
- Advances in Economics and EconometricsTheory and Applications, Ninth World Congress, pp. 136 - 185Publisher: Cambridge University PressPrint publication year: 2006