Illegal markets reward intermediaries who supply trust and information for a commission.

Evidence

The furniture dealer maintained that “Peppe” was mainly selling information, thereby making the transactions possible, and that it was for this service that he received a 2 percent commission. When in addition he acted as a guarantor of quality and payment, the percentage increased. He himself had in his youth thought of becoming a “Peppe” on the livestock market but was discouraged by the theatrical requirements of the job, which entails a perpetual exchange of insults, simulated outrage, ritual claims of friendship, handshaking, and robust shoulder patting. … All the transactions in question were illegal. They were part of the so-called clandestine slaughtering marker, a market which has long been said—in one of chose wholistic and sinister formulas common in this field—to be “under the control of the mafia.” According to law, no transaction involving meat may take place outside the public slaughterhouse, the only permissible meeting point for butchers and catcle breeders. There the problem of trust, as the vaccaro himself pointed out, is less acute, for the weight, health, and quality of the animal are formally controlled and easily verified. Nonetheless, there is an incentive to bypass the legal procedure: the opportunity to avoid tax. At a cost which must be lower than the tax, the presence of “Peppe” as informer and guarantor makes this attractive but illegal transaction feasible. — Diego Gambetta, The Sicilian Mafia The Business of…, 40

Categorization

• XREF: Directly instantiates Milgrom et al.’s private-judge law merchant model — the middleman substituting for a public enforcement agency in an informal market.
• CANDY: My favorite sentence is the theatrical requirements of the ‘Peppe’ job: perpetual insults, simulated outrage, ritual friendship claims, handshaking, and shoulder patting.