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This paper argues that enforcement of an agreement, reached under a coercive threat to refrain from dealing, should be conditioned solely on the credibility of the threat. When a credible threat exists, enforcement of the agreement promotes both social welfare and the interests of the threatened party. If agreements backed by credible threats were not enforceable, the threatening party would not bother to extort them, and would simply refrain from dealing -to the detriment of the threateneddoi:10.1086/421574 fatcat:6julofe7zrfe7hjwxa7bvabvha