Diamond dealers consistently maintain that transactions between two club members, between two nonmembers, and between a member and a nonmember are conducted in exactly the same way. If the availability of the DDC's arbitration system and enforcement mechanisms were central to parties' ex ante decision making, the terms of the transaction (either substantive or price) should be different when at least one party is a nonmember. For example, a member seller who would sell a stone to another member on thirty-day terms would be expected to charge a nonmember a higher price (or perhaps demand cash on the spot) to compensate for the risk of nonpayment and the unavailability of arbitration. Dealers insist, however, that no such differences exist and that they decide who to deal with purely on the basis of the other party's reputation. … If reputation bonds are well functioning, this behavior is not surprising. In a transaction between a member and a nonmember, the nonmember has an incentive to keep the bargain if he wants to be admitted to the bourse in the future. The economic benefits of bourse membership make it actively sought after by most market participants. A member can not only spread the word about the nonmember's wrongdoing, but he can also object to his being accepted for club membership. In transactions between two nonmembers, both parties have reason to worry about their reputations. In order to obtain a steady supply of rough to run an efficient manufacturing business, a nonmember must have a reputation of being scrupulously trustworthy. Nonmembers know that their potential future trading partners will inquire more deeply into their reputation before transacting with them since they do not have the club's stamp of approval.

Lisa Bernestein, Opting out of the Legal Sys…, loc. 250