Diamond loans rest on reputation because stones lack objective pricing.
Evidence
One reason a relatively small number of banks are involved in the diamond industry is that evaluating the worth of a stone (often used as inventory collateral) in the absence of an objective and readily ascertainable market price requires an expertise in gemstones that bankers seldom have. Consequently, many loan decisions are really made on the basis of the bank’s perception of the dealer’s reputation in the marketplace. — Lisa Bernestein, Opting out of the Legal System, 268
Categorization
- XREF: Connects to the reading purpose: institutions like banks, lacking the secrecy-community’s reputation mechanism, still lean on reputation — showing how dense-tie trust substitutes for objective valuation. Also resonates with the reader’s Coleman/network-closure frame. — connects to: Reputation, not third-party enforcement, governs diamond market transactions. — Lisa Bernestein, Opting out of the Legal System, 252
Related
- Undetectable diamond treatments shift verification burden onto reputation chains. (similarity 0.82)
- Diamond trade discipline runs on reputation fear, not arbitration or courts. (similarity 0.81)
- Reputation, not third-party enforcement, governs diamond market transactions. (similarity 0.78)
Broader Connections
- Reputation, not third-party enforcement, governs diamond market transactions.
#corroborates(0.95) — Lisa Bernestein, Opting out of the Legal System, 252