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Solomon's Knot by Robert D. Cooter, Hans-Bernd Schäfer

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Chapter 7

Doing What You Say—Contracts

the Soviet commissar needed to cooperate with the director of the State Steel Combine in Russia in the 1960s. They were also rivals, so the commissar kept an eye on the director’s movements. One day they met in the Moscow railway station. The commissar asked the director, “Where are you going?” The director replied, “To Leningrad.” The commissar thought to himself, “He says that he is going to Leningrad because he wants me to think that he is going to Minsk, but I know that he really is going to Leningrad.” So the commissar said to the director, “You’re lying!”

This joke depicts the problem of credible communication. To coordinate their behavior, people must say what they will do and do what they say. How ...

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