Secrecy norms make an industry prefer extralegal agreements over courts

Evidence

Given the well-established institutional premium on secrecy, parties are rarely willing to pay the reputational price of violating that norm simply to gain access to the courts. Historically, preserving the secrecy norm is one of the primary reasons that the industry uses extralegal agreements rather than legally enforceable contracts. — Lisa Bernestein, Opting out of the Legal System, 144

Categorization

• XREF: Connects to the reader’s framework of network closure (Coleman) — secrecy functions as a closed-network norm that predation against the state. — connects to: Secrecy norms drive the bourse to prefer extralegal agreements over enforceable contracts.; Secrecy is the key reason dealers prefer arbitration over courts.; Deliberate opaqueness in dispute resolution discourages parties from litigating to judgment. — Lisa Bernestein, Opting out of the Legal System, 88 (+1 more)
• QUESTION: What exactly is the ‘reputational price’ — shunning, blacklisting, exclusion from future trades? The mechanism of sanction is underspecified.

Broader Connections

• Secrecy norms drive the bourse to prefer extralegal agreements over enforceable contracts. #corroborates (0.95)
• Secrecy is the key reason dealers prefer arbitration over courts. #corroborates (0.90)
• Deliberate opaqueness in dispute resolution discourages parties from litigating to judgment. #qualifies (0.75) — Lisa Bernestein, Opting out of the Legal System, 88