In the context of the diamond market, these conditions seem to hold. The probability that the transactors will have occasion to deal with one another in the future, 4 , is quite high. In addition, many aspects of the industry suggest that the condition that b > c will hold. For example, a diamond dealer generally operates on a slim cash flow margin and has trouble getting access to capital. He routinely makes business decisions in reliance on receiving payment on a particular date. If he is not paid, the harm he suffers can be far greater than loss of the amount of money he is owed. Nonreceipt of payment might force him to breach a contract with another dealer, which will in turn damage his reputation. It might force him into insolvency and result in suspension from the club.

XREF: Connects to formal/relational contract theory and how reputation sustains cooperation in closed trading networks.

Lisa Bernestein, Opting out of the Legal Sys…, loc. 191