Munich Personal RePEc Archive

On the Enforcement of Trade Embargoes by the Merchant Guilds

Fehr, Nils-Henrik M. von der and Harbord, David (2018): On the Enforcement of Trade Embargoes by the Merchant Guilds.

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Abstract

Compensation from rulers of trading centres to merchants whose property rights had been violated was a notable feature of early European international trade. We demonstrate in a repeated-game model that demands for compensation made threats by merchant guilds to impose trade boycotts self-enforcing for individual merchants, thus removing incentives for embargo breaking that could otherwise have rendered guilds powerless. Long-distance merchants were thus protected from predation by medieval city rulers, possibly providing a foundation for the trade expansion of the `Commercial Revolution'. We also address the frequently neglected issue of whether the guilds and cities would have agreed on the level of trade which they wished to support.

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