Territorial allocation fails when profits are unevenly distributed, so cartels share customers instead

Evidence

Not all markets can be efficiently allocated by territory, such as when dealers congregate in one location, as in wholesale markets, or when customers are highly mobile. Furthermore, geographic divisions are not always satisfactory because profits may be so unevenly and unpredictably distributed that it becomes impossible to keep cartel members happy. Generally a better alternative solution is to share customers. — Diego Gambetta, The Sicilian Mafia The Business of…, 525

Categorization

• XREF: Connects to the reader’s Gambetta framework: territory/brand parcellization breaks down under uneven profit; mirrors Milgrom’s analysis of when private judges scale fails. — connects to: Inefficient payment intermediaries persist because their cuts generate collective rent — Yanis Varoufakis, Technofeudalism: What Killed Capitalism, 606