Buying protection against oneself signals credibility and creates a new efficient equilibrium.

Evidence

The seller may thus choose to purchase protection “against” himself—that is, against his own temptation to sell a lemon—In order to acquire credibility in the eyes of a distrustful buyer. If it is known that the mafioso will punish him if he sells a lemon, and therefore the seller would lose more by selling a lemon than by selling a sound horse, then a rational buyer should be persuaded that it is safe to enter into the transaction. The seller’s cut to the mafioso would reflect the price he is prepared to pay to be trusted by the customer. By virtue of such a contract a new equilibrium would come into play, and even in a simple world made up of just three agents—seller, buyer, and mafioso—everyone would be better off. Transaction costs would be higher than in a trustworthy world, but returns would still exceed those yielded by no transaction at all. Thus, in an untrustworthy world the price paid for the services of a mafia may have more than one rational justification for both parries to a transaction. (I say untrustworthy rather than dishonest because neither party need know for sure that the other party is dishonest; the suspicion alone may be sufficient to justify the purchase of protection, thereby yielding the same result.) — Diego Gambetta, The Sicilian Mafia The Business of…, 50

Categorization

• XREF: This is the purest statement of the reader’s core model: third-party enforcement as a credible-commitment device that enables transactions that would otherwise not occur — direct parallel to Schelling’s commitment mechanics and Milgrom’s private judges. — connects to: Self-valuation paired with a buy-out threat aligns renters to price honestly. — Yanis Varoufakis, Technofeudalism: What Killed Capitalism, 743
• DEFINE: Distinguishes ‘untrustworthy’ from ‘dishonest’ — suspicion alone, not proven dishonesty, justifies protection purchase; a subtle mechanism distinction worth keeping.