Extralegal contracting costs fall when such contracts dominate a market.

Evidence

In general, the magnitude of precontract transaction costs incurred in the formation of extralegal contracts will depend on how common such contracts are in the relevant market. In the diamond industry, extralegal contracts are the dominant contractual paradigm. Consequently, the industry is organized to minimize the cost of obtaining information about dealers’ reputations. — Lisa Bernestein, Opting out of the Legal System, 132

Categorization

• XREF: Connects to the reader’s Coleman network-closure interest: dense markets institutionalize reputation infrastructure, which is the flip side of how closure aids cooperation. — connects to: Extralegal reputation-based contracting can work in large markets when information flows cheaply. — Lisa Bernestein, Opting out of the Legal System, 178
• corroborated: 2 independent passages support this claim — Lisa Bernestein, Opting out of the Legal System, 132