The institution that we model as the resolution of these problems is based on the presence of a specialized actor - a "judge" or "law merchant" (LM) who serves both as a repository of information and as an adjudicator of disputes. The core version of our model is based on the following assumptions. After any exchange, each party can accuse the other of cheating and appeal to the LM. Any dispute appealed to the LM is perfectly and honestly adjudicated at cost C to the plaintiff.

DEFINE: Introduces the law merchant (LM) model as a repository of information and dispute adjudicator in economic exchange.

PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE O…, loc. 79