To represent the idea that cheating may be profitable in a simple exchange, we use the Prisoners' Dilemma (PD) game as our model of a single exchange transaction. Although this PD model is too simple to portray the richness of even simple contracts, it has the advantage that it is very well known and its characteristics in the absence of institutions have been thoroughly studied, so that the incremental contribution made by the Law Merchant system will be quite clear. Moreover, the PD game represents in an uncluttered way the basic facts that traders have opportunities and temptations to cheat and that there are gains possible if the traders can suppress these temptations and find a way to cooperate.

PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE O…, loc. 42