Essays in private ordering: Mechanisms, efficiencies, and the law

This dissertation examines the mechanisms that underlie, the efficiencies obtained by, and the legal implications of the coordinated enforcement mechanisms that support diamond credit sales among Jewish merchants in New York. Chapter 1 begins with the rudiments of the diamond sale for uncut and polished diamonds and observes that institutional limitations prevent state-sponsored courts from credibly enforcing diamond credit sales. Given the sizable advantages of purchasing diamonds on credit, it then argues that merchants able to credibly commit to such credit sales will have significant economic advantages over those who cannot. The chapter's main contribution is its detailing of the distinctive set of industry, family, and community institutions that enable Jewish diamond merchants to punish fellow merchants who breach from their contractual obligations, thereby enabling each community member to commit credibly to diamond credit sales. It thus argues that Jewish merchants' ability to reliably implement diamond credit sales explains their historical success in the diamond industry.;Chapter 2 formulates a positive model that addresses three distinct types of enforcement mechanisms---firms, courts, and reputation-based private ordering. This chapter synthesizes transaction cost economics, which compares the efficiencies of firms versus markets, with the legal literature on private ordering, which compares the efficiencies of public courts versus private ordering, to construct a predictive model that rests on the beneficial attributes of transactional security, incentive intensity, and nonexclusivity. The model hypothesizes when commercial parties will employ multilateral private ordering to enforce their agreements, and the chapter explores some preliminary evidence that supports the model.;Chapter 3 compares the predictions in Chapter 2 to the normative rules reflected in current antitrust law and concludes that the current doctrine on concerted refusals to deal does not appropriately incorporate the lessons of institutional economics. The chapter then offers an efficiency justification for concerted refusals, focusing specifically on the institutional arrangements assembled by New York's diamond merchants, and concludes that a legalistic application of current caselaw and doctrine will not permit many multilateral private ordering arrangements that achieve important efficiencies. It suggests, more generally, that institutional economics can meaningfully inform and update several misleading antitrust doctrines and urges policymakers to regularly employ institutional economics in evaluating concerted refusals and other complex organizations unfamiliar to and unpredicted by price theory.