Anarchy, Monopoly, and Predation

Although institutions rooted in the folk theorem can support self-enforcing exchange in a wide variety of contexts, their potential to create cooperation is not limitless. In particular, the folk theorem may break down when some agents are physically stronger than others. This study demonstrates this in the context of Stringham's [2006] vertically integrated proprietary communities. In this system a monopoly proprietor maximizes profits by optimally extorting his tenants in violation of voluntary contracts. The result is a predatory rather than voluntary regime.

Read the article at Ingenta Connect.