Monthly-renewed protection contracts fail for both buyer and seller
Evidence
In the first place, they would waste their time bargaining every month. But there would also be two other, more serious consequences if the contract were only intermittently renewed: Mr. X would be vulnerable to predators in his unprotected months and so could not make long-term plans for investment; and, Don Peppe would be obliged to keep indicating to predators when Mr. X was untouchable and when he was fair game. The undesirable effects would be twofold: predators might become confused and attack Mr. X in the wrong month; alternatively, Mr. X might remain safe during a month when he had not paid, thereby enjoying free protection. In addition, Don Peppe could not easily monitor all former clients who might continue to use his name even when they were no longer paying for the right. — Diego Gambetta, The Sicilian Mafia The Business of…, 147
Categorization
Category: Causal Relationships
- XREF: This is exactly the Milgrom/North/Weingast private-judges argument — indefinite, self-enforcing relational contracting replaces finite spot contracts. Also Schelling: Don Peppe’s signaling problem of marking who is fair game is a commitment/credibility issue.
- QUESTION: Testable against real protection markets: does the same logic explain why feudal lordship contracts were lifelong? Or why modern protection rackets in non-mafia settings also adopt standing rather than term contracts?
Related
- Intermittent protection contracts fail because they create ambiguity for predators (similarity 0.87)
- Ongoing protection resists pricing because its threats are vague and constant (similarity 0.79)
Broader Connections
- Contractual trust fails where state enforcement is sporadic
#corroborates(0.85) — Diego Gambetta, Trust - Making and Breaking Cooperative…, 2426 - Overt risk calculation in contracts can undercut the trust it formalizes
#complicates(0.75) — Russell Hardin, Trust and Trustworthiness, 588