Group rules for allocating shared contracts require trading efficiency against enforcement difficulty

Evidence

In Rome the drivers simply cut the knot by changing the rule: they allocate the service to the first driver who replies on the basis of the rule “first come, first served.” This is an imperfect solution, however, for drivers who are systematically slower in getting on the radio are penalized. Also, since the meter is turned on as soon as the call is taken, customers are never sure that they are paying, in both money and waiting time, for the shortest possible pickup distance. — Diego Gambetta, The Sicilian Mafia The Business of…, 589

Categorization

• XREF: Connects to Milgrom et al.’s private judges analysis and the general problem of designing allocation rules that are self-enforcing rather than requiring third-party monitoring.