Collusive agreements remain fragile and racketeers overstay their welcome

Evidence

It has been argued that an important function of the racketeer is sometimes to help enforce agreements that are beyond the law. Price-cutting in the Chicago garment trade was punishable by explosion—the fee for the explosion being paid by the price-fixing organization—according to R. L. Duffus, “The Function of the Racketeer,” New Republic (March 27, 1929), pp. 166–68. — Thomas C. Schelling, The Strategy of Conflict, 774 (#expands, via linked claim)

The tactic of decomposition applies to promises as well as to threats. What makes many agreements enforceable is only the recognition of future opportunities for agreement that will be eliminated if mutual trust is not created and maintained, and whose value outweighs the momentary gain from cheating in the present instance. Each party must be confident that the other will not jeopardize future opportunities by destroying trust at the outset. This confidence does not always exist; and one of the purposes of piecemeal bargains is to cultivate the necessary mutual expectations. — Thomas C. Schelling, The Strategy of Conflict, 118 (#contradicts, via linked claim)

Oligopoly, however, makes for a more precarious equilibrium than competition. Should a member of the cartel try to obtain a larger share, as in the case of the funeral homes in Naples, or should those excluded from the cartel start a countercoalition, the equilibrium would collapse, and that “respect” would be shattered. — Diego Gambetta, The Sicilian Mafia The Business of…, 562 (#corroborates, via linked claim)

Categorization

• XREF: connects to: Agreements stay enforceable through the shadow of future bargains — Thomas C. Schelling, The Strategy of Conflict, 118; Loose social conventions undermine our capacity to make credible long-term commitments; Racketeers enforce cartel agreements that lie beyond legal sanction — Thomas C. Schelling, The Strategy of Conflict, 774 (+1 more)

Related

• Racketeers enforce cartel agreements that lie beyond legal sanction (similarity 0.86)
• Cartel equilibria are more fragile than competitive ones (similarity 0.86)
• The capo mafia provided the trust that made cartel collusion stable (similarity 0.83)
• Cartels hire mafia-protected unions as enforcers to coerce reluctant clients (similarity 0.83)
• Racket-run cartels reduce production efficiency more than conventional cartels (similarity 0.82)
• Agreements stay enforceable through the shadow of future bargains (similarity 0.80)

Broader Connections

• Racketeers enforce cartel agreements that lie beyond legal sanction #expands (0.85) — Thomas C. Schelling, The Strategy of Conflict, 774
• Agreements stay enforceable through the shadow of future bargains #contradicts (0.80) — Thomas C. Schelling, The Strategy of Conflict, 118
• Cartel equilibria are more fragile than competitive ones #corroborates (0.75) — Diego Gambetta, The Sicilian Mafia The Business of…, 562
• Loose social conventions undermine our capacity to make credible long-term commitments #corroborates (0.72)