With limited information about the past behavior of trading partners and no institution to compensate, there are no incentives for honest behavior. It is evident that incentives could be restored by introducing an institution that provides full information to each trader about how each other has behaved. Such an institution, however, would be costly to operate. Moreover, efficient trade does not require that every trader know the full history of the behavior of each other trader.

PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE O…, loc. 73