Given the instability of any equilibrium based solely on mutual fear, does it follow that agents will seek explicit agreements to ensure the peace? Not necessarily; nor can the decision to do so be fully accounted for by theory alone, for there is no inescapable equilibrium. Here we stumble into the much less predictable realm of politics. We may assume that the costs of war will provide reasonable agents with sufficient incentive to negotiate agreements to soften the impact of events such as those I have just described and develop the kind of organizational arrangements capable of enforcing such agreements among themselves. But history is full of counterexamples, and not just because unreasonable men can attain positions of power, but precisely because all agreements need enforcement. (If we were all true to our word all the time the notions of protection and trust simply would not exist.) Enforcement in this case requires an authority capable not merely of protecting ordinary buyers from old-fashioned equine lemons but of protecting protection firms from one another. To be effective this authority must be powerful enough to punish individual defectors as well as potential coalitions. Where can such a superagency be found? And who would be in a position to keep it in check? It would itself have to be a protection firm, a mafia. At best the enforcing superagency could be created from a coalition of the stronger firms which agree to cooperate in punishing defectors. The end result would be a hierarchical oligopoly in which smaller firms shelter at some cost under the wings of their larger brothers, which cooperate in maintaining the overall territorial agreement. But there would be no one else to en force that cooperation.

QUESTION: The passage ends mid-thought about a coalition of stronger firms. Where does this lead — a monopoly of force, or a fragile stable coalition? Worth tracking the author's resolution.

Diego Gambetta, The Sicilian Mafia The Busi…, loc. 190