COORDINATION, COMMITMENT, AND ENFORCEMENT - THE CASE OF THE MERCHANT GUILD

We interpret historical evidence in light of a repeated-game model to conclude that merchant guilds emerged during the late medieval period to allow rulers of trade centers to commit to the security of alien me rchants. The merchant guild developed the theoretically required attri butes, secured merchants' property rights, and evolved in response to crises to extend the range of its effectiveness, contributing to the e xpansion of trade during the late medieval period. We elaborate on the relations between our theory and the monopoly theory of merchant guil ds and contrast it with repeated-game theories that provide no role fo r formal organization.