Sellers pay mafiosi both for trustworthiness and for privileged customer direction

Evidence

So far we have assumed that the market is made up of just three agents: customer, salesman, and mafioso. But if there is more than one seller in the market, the introduction of competition complicates the game. In this case the seller may pay the mafioso for a further service not directly connected with trust: for directing the customer to him rather than to his competitors. If all sellers appear equally untrustworthy and the mafioso can enforce honest behavior from any one of them, he must therefore have a reason to choose one in particular for whom to act as guarantor. The seller’s cut to the mafioso reflects both the price of being made to be trustworthy and the additional price of being chosen from among other potential sellers. — Diego Gambetta, The Sicilian Mafia The Business of…, 54

Categorization

• XREF: The dual price (trustworthiness + customer-steering) maps onto Milgrom’s finding that private judges at the Champagne Fairs did more than certify honesty — they allocated business among entrants.