Contractual commitments shift negotiation costs rather than truly binding anyone

Evidence

Incidentally, some of the more contractual kinds of commitments are not as effective as they at first seem. In the example of the self-inflicted penalty through the bet, it remains possible for the seller to seek out the third party and offer a modest sum in consideration of the latter’s releasing the buyer from the bet, threatening to sell the house for $16,000 if the release is not forthcoming. The effect of the bet—as of most such contractual commitments—is to shift the locus and personnel of the negotiation, in the hope that the third party will be less available for negotiation or less subject to an incentive to concede. To put it differently, a contractual commitment is usually the assumption of a contingent “transfer cost,” not a “real cost”; and if all interested parties can be brought into the negotiation the range of indeterminacy remains as it was. — Thomas C. Schelling, The Strategy of Conflict, 68

Categorization

• XREF: This ‘transfer cost vs real cost’ distinction maps directly onto Gambetta’s point that Mafia enforcement substitutes for state courts — a mediator’s costs are escapable unless all parties are captured, which is why the Mafia uses reputation and violence to make commitments ‘real’. — connects to: Lease-construction contracts shift base construction costs onto future Congresses.; Agreements stay enforceable through the shadow of future bargains — Thomas C. Schelling, The Strategy of Conflict, 118; Handshake-deal transaction costs are not obviously lower than formal contract costs. — Lisa Bernestein, Opting out of the Legal System, 126 (+2 more)
• ADDENDUM: Supports the ‘credible commitments’ mechanics from the stated reading purpose: hostage/tie-me-down commitments fail unless the third party is genuinely hard to reach, echoing how Bonasera needs an enforcer with real (not merely contractual) power.

Broader Connections

• Lease-construction contracts shift base construction costs onto future Congresses. #exemplifies (0.92)