Strategic Coordination and the Law

We re-examine the relationship between coordination, legal sanctions, and free-riding in light of the recent controversy regarding the applicability of the coordination problem paradigm of law-making. We argue that legal sanctions can help solve coordination problems by eliminating socially suboptimal equilibrium outcomes. Once coordination has taken place, however, free-riding can not lead to the breakdown of coordination outcomes, even if sanctions may still be effective at increasing the equity of such outcomes. Finally, we argue that it is the choice of a legal or constitutional system rather than the choice of law that is paradigmatic of the coordination problem. This view requires a re-assessment of the normative status of sanctions attached to individual laws. We thank Catherine Hafer and two anonymous reviewers for helpful comments and suggestions.