Racket-run cartels reduce production efficiency more than conventional cartels

Evidence

The agreement also permits inefficient firms to stay in the market and prevents efficient firms from growing. The higher prices result directly from the imposition of restraints of trade… In each dimension, the effect is likely to be greater for a racket-run cartel than for other cartels. — Diego Gambetta, The Sicilian Mafia The Business of…, 531

Categorization

• XREF: The claim that racketeer confidence reduces efficiency incentives more than a conventional cartel directly parallels the reader’s question of how private enforcement substitutes for — and in this case exceeds — state-backed enforcement. — connects to: Cartel equilibria are more fragile than competitive ones — Diego Gambetta, The Sicilian Mafia The Business of…, 562; Mafia protection makes collusion more likely, elaborate, and enduring — Diego Gambetta, The Sicilian Mafia The Business of…, 521; Racketeers enforce cartel agreements that lie beyond legal sanction — Thomas C. Schelling, The Strategy of Conflict, 774
• corroborated: 2 independent passages support this claim — Diego Gambetta, The Sicilian Mafia The Business of…, 531

Broader Connections

• Racketeers enforce cartel agreements that lie beyond legal sanction #expands (0.85) — Thomas C. Schelling, The Strategy of Conflict, 774
• Mafia protection makes collusion more likely, elaborate, and enduring #corroborates (0.75) — Diego Gambetta, The Sicilian Mafia The Business of…, 521
• Cartel equilibria are more fragile than competitive ones #contradicts (0.70) — Diego Gambetta, The Sicilian Mafia The Business of…, 562