Networks, law, and the paradox of cooperation

Caplan, Bryan and Stringham, Edward (2003): Networks, law, and the paradox of cooperation. Published in: Review of Austrian Economics , Vol. 16, No. 4 (December 2003): pp. 309-326.

Abstract

There is a tension between libertarians’ optimism about private supply of public goods and skepticism of the viability of voluntary collusion (Cowen 1992, Cowen and Sutter 1999). Playing off this asymmetry, Cowen (1992) advances the novel argument that the “free market in defense services” favored by anarcho-capitalists is a network industry where collusion is especially feasible. The current article dissolves Cowen’s asymmetry, showing that he fails to distinguish between self-enforcing and non-self-enforcing interaction. Case study evidence on network behavior before and after antitrust supports our analysis. Furthermore, libertarians’ joint beliefs on public goods and collusion are, contrary to Cowen and Sutter (1999), theoretically defensible.

• Item Type: MPRA Paper
• Language: English
• Keywords: networks; anarcho-Capitalism; collusion
• Subjects: L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; K - Law and Economics > K4 - Legal Procedure, the Legal System, and Illegal Behavior > K42 - Illegal Behavior and the Enforcement of Law; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L15 - Information and Product Quality ; Standardization and Compatibility

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