It might be argued that an outsider with no established reputation could overcome reputation-related barriers to entry by offering to transact using legally enforceable contracts. If extralegal contracts are rationally preferred, however, a promisor offering a written agreement would have to offer a much higher price to compensate the promisee for the risk and imperfections of litigation-not only the actual cost and uncertainty of the litigation, but also the reputational damage of being involved in a court suit at all. More important, over a certain range of transaction values, a legally enforceable agreement is not of great value to a party. Even with larger transactions, the expected value of a legally enforceable contract in the absence of information about the other party's reputation might be less than the expected value of a legally unenforceable agreement with a person with a reputation for honesty and fair dealing.

Lisa Bernestein, Opting out of the Legal Sys…, loc. 213