High-ranking bosses arbitrated disputes and settled controversies across continents

Evidence

The Sicilian bosses were, according to the Carabinieri, “kept constantly informed about the course of the transport and shiploads, ready to give orders and instructions on how to overcome difficulties, correct mishaps, and sometimes settle disputes and disagreements… If need be, they themselves (traveled) from one continent to the other” (CPM: 1025). Yet, despite all precautions, many insoluble controversies arose. In 1956 the American mafiosi Carmine Lo Cascio and Joseph Mogavero discovered that the heroin sent from Italy by the Caneba brothers was of poor quality and melted at too low a temperature (below 220 degrees centigrade). They retaliated by sending an envoy to Italy with less money than agreed. Tests conducted jointly by both the envoy and the Caneba brothers showed that one of the two sources of raw material was in fact defective. Nonetheless, the brothers demanded the full sum as well as advance payment for any further transactions. In fact they got neither; Lo Cascio and Mogavero simply dropped all future business (CPM: 8). — Diego Gambetta, The Sicilian Mafia The Business of…, 634

Categorization

• XREF: Institutional failures in informal markets led contracts to collapse in ways Milgrom’s law merchant analysis predicts — the partners walked away rather than invoking coercive enforcement.
• QUESTION: Why did the American buyers drop future business rather than escalate to mafiosi mediation? Contract collapse here shows even informal enforcement had limits on quality disputes.