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.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: International trade, institutions, noncooperative games, merchant guilds
• Subjects: C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games; D - Microeconomics > D0 - General > D02 - Institutions: Design, Formation, Operations, and Impact; N - Economic History > N4 - Government, War, Law, International Relations, and Regulation > N43 - Europe: Pre-1913

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