Insider reputation monitoring is cheaper than bank credit checking
Evidence
Unlike banks, sight holders are industry insiders; they have good information about individual dealers’ reputations and transact with the same people on a repeat basis over a long period of time. It is thus cheaper for sight holders to monitor dealers’ reputations and credit worthiness than it is for banks. Consequently, it is likely that sight holders can offer terms — Lisa Bernestein, Opting out of the Legal System, 119
Categorization
- XREF: Direct analog of Coleman network closure producing trustworthiness through repeated interaction with the same partners — here operating to the benefit of market efficiency rather than against state authority. — connects to: DeBeers sight-holder status substitutes for bank credit screening — Lisa Bernestein, Opting out of the Legal System, 118; A private cartel’s monitoring substitutes for institutional trust and underwrites credit access. — Lisa Bernestein, Opting out of the Legal System, 25; Preexisting social ties make intra-community monitoring cheaper than external oversight. — Lisa Bernestein, Opting out of the Legal System, 207 (+4 more)
Related
- DeBeers sight-holder status substitutes for bank credit screening (similarity 0.87)
- Preexisting social ties make intra-community monitoring cheaper than external oversight. (similarity 0.85)
- A private cartel’s monitoring substitutes for institutional trust and underwrites credit access. (similarity 0.84)
- Private legal systems can rival state law when reputation functions as enforcement. (similarity 0.79)
Broader Connections
- Cartel monitoring substitutes for bank due diligence in diamond financing.
#corroborates(0.92) - Intermediaries reduce reputational information costs in extralegal markets.
#corroborates(0.85) — Lisa Bernestein, Opting out of the Legal System, 133 - Social homogeneity lowers the cost of private monitoring within trading groups.
#expands(0.80) - A private cartel’s monitoring substitutes for institutional trust and underwrites credit access.
#corroborates(0.78) — Lisa Bernestein, Opting out of the Legal System, 25 - Reputation substitutes for formal enforcement in private trading clubs
#corroborates(0.75) — Lisa Bernestein, Opting out of the Legal System, 43 - Preexisting social ties make intra-community monitoring cheaper than external oversight.
#corroborates(0.72) — Lisa Bernestein, Opting out of the Legal System, 207