In this article, we unearth the institution for enforcement of the agreement between the Opec Boys, fuel smugglers and ex-rebels, and a politician, who allows them to conductillegal smuggling. Rather than the Opec Boys’ threat of rebellion, their promise of political support and refraining from civil disorder matters to inflict cooperation. A repeated play mechanism where the players punish each other for defection but return to cooperation makesup the ‘rules of the game’. Uncovering this endogenously emerged institution for contractenforcement explicitly reveals the importance of political alliances in the second economy in a fragile state environment.
Year: 2007 HiCN Working Paper No. 036