Organized thuggery

Abstract Few mafia traditions have endured as long or been shared as widely as the pizzo . The pizzo was and is a customary payment collected from clients by Italian mafias in exchange for private protection. The value of the pizzo was vulnerable to two sources of dissipation. First, excess competition for clients from other mafiosi . Second, evasive behavior from clients themselves. I argue that Italian mafias created de facto property rights to limit those losses. To limit competition, mafias in Italy defined client ownership via territorial delineation. To limit opportunism by clients, mafias tailored pizzo terms in proportion to clients’ latitude for opportunism. Historical evidence from New York mafias and Italy’s retailing and construction industries supports my thesis.