Thursday, 7 May 2015

Credible Crack Commitments

Suppose that you're a crack dealer and you know that the Mayor of Toronto would like to buy some crack. But the mayor rightly fears that you might surreptitiously video the mayor's crack use and sell the video for big big money.

If the mayor doesn't trust you, he won't buy your crack. If he does buy your crack, and you can get away with it, you will video and sell. Since you can't commit to not videoing, he won't buy and you're both left worse off.

How can the dealer credibly commit to not videoing the transaction?

  1. If the mayor can commit to violent retaliation even where such retribution would be personally costly, then that can induce performance. But it's can be hard for a mayor to make that kind of credible commitment when he's had large public disputes with the police.
  2. The mayor could require the dealer to provide him with his name and address. Then, the mayor could wear a big "I'm smoking Jim's crack" t-shirt during any videoing. Any released video would implicate the dealer, who could then be arrested for selling crack and would likely have any video profits seized as a proceed of crime.
    • But, the mayor would know that a sufficiently canny dealer could blur out the t-shirt's incriminating details before selling the video, so that doesn't work. Further, it's really no different from committing to rat out the dealer if arrested. Where the dealer has an easier time hiding than a large and prominent Mayor (and doesn't lose much by having to hide out), it won't work. 
  3. Maybe the dealer could establish a reputation for being the dealer who's discreet. So the mayor could ask other prominent Torontonians who also use crack, and who would plausibly have been blackmailed already by their dealers were their dealers the blackmailing and videoing type, who their dealers are. But the bigger the portfolio of such folks that one dealer amasses, the greater the chances that the one off "sell all the video" gains will dominate the flow of continued celebrity drug money earnings.
I'm not sure there are any good feasible solutions to the problem. Since no dealer can credibly commit to not selling out the Mayor, the Mayor won't buy the crack.


  1. This is one of the problems Silk Road had, eg

  2. This makes me think of the escort service which had Eliot Spitzer as a client (amongst a bunch of other famous clients). Word at the time from a now completely forgotten source, was not that Spitzer paid too much by arranging a four figure hooker, but that he paid too little.

    Apparently there are escort services who provide the same service, but for three times the price, but also with what effectively constitutes a security clearance. Prospective clients must be cleared by the service to make sure that they aren't compromised, and by extension, that they won't compromise the other clients at the very secret escort service.

    Presumably at this service, the income stream from the very well connected clients, including the very steep price premium, was enough to incentivise the service to keep them secret.