Diamond dealers’ secrecy about trading partners blocks efficient resale markets.

Evidence

Given the structure of the market for rough diamonds, however, if S sells to M I, it is unlikely that the stone will wind up in the hands of M2. Dealers keep their trading partners secret, particularly their sources of rough, since a dealer’s ability to operate at a profit depends, in large part, on his network of contacts. After buying a stone that can be cut at a profit, most manufacturers do not want to incur the search cost of ensuring that the stone cannot be more profitably cut by another manufacturer, not do they want it known that they have a particular type of rough in their possession. — Lisa Bernestein, Opting out of the Legal System, 220

Categorization

• XREF: Connects to the reader’s Coleman network-closure framework: secret contacts are precisely the dense, closed social ties that resist state-legal reallocation — same dynamic Bellodi faces in the Sicilian piazza. — connects to: Secrecy and private offices displace open trading for large diamond dealers. — Lisa Bernestein, Opting out of the Legal System, 41; Reputation, not third-party enforcement, governs diamond market transactions. — Lisa Bernestein, Opting out of the Legal System, 252; Physical inspection constraints shape where diamond trades happen (+3 more)

Related

• Secrecy and private offices displace open trading for large diamond dealers. (similarity 0.92)
• Reputation, not third-party enforcement, governs diamond market transactions. (similarity 0.83)
• The diamond trade sustains an extralegal contractual regime through private arbitration and reputational enforcement. (similarity 0.82)
• Secrecy of arbitral disputes preserves a party’s creditworthiness and reputation. (similarity 0.80)
• Secrecy norms drive the bourse to prefer extralegal agreements over enforceable contracts. (similarity 0.79)

Broader Connections

• Private bourse dispute-resolution and secrecy keep the diamond trade extralegal and low-breach. #expands (0.85)
• Reputation, not third-party enforcement, governs diamond market transactions. #corroborates (0.82) — Lisa Bernestein, Opting out of the Legal System, 252
• Secrecy is the key reason dealers prefer arbitration over courts. #exemplifies (0.78)
• Physical inspection constraints shape where diamond trades happen #expands (0.75)