ABSTRACT
Gambetta and Reuter's timely study addresses the neglected problem of the mafia's role: their idea is that 'mafia solves a problem of potential cartels', by providing a paid service to entrepreneurs asking for 'profit-enhancing and risk-reducing regulation'. In their conclusion they seem to downplay the argument proposed, arguing that in recent years the mafia has been losing power and therefore that their analysis may be of 'more analytical than policy interest'. The alternative to this framework would be to consider the mafia as an exogenous 'auctioneer', but that would simply assume what has rather to be explained, namely the mafia's economic role. The equilibrium of this market is robust, as one should expect when dealing with the mafia. The mafia provides a service which has the characteristics of a local public good: in fact cartel stability is a service that cannot be individually appropriated and for which not every firm can benefit by excluding the others.
