CONTRACT ENFORCEABILITY AND ECONOMIC INSTITUTIONS IN EARLY TRADE - THE MAGHRIBI TRADERS COALITION

This paper Presents an economic institution which enabled 11th-century traders to benefit from employing overseas agents despite the commitm ent problem inherent in these relations. Agency relations were governe d by a coalition - an economic institution in which expectations, impl icit contractual relations, and a specific information-transmission me chanism supported the operation of a reputation mechanism. Historical records and a simple game-theoretical model are used to examine this i nstitution. The study highlights the interaction between social and ec onomic institutions, the determinants of business practices, the natur e of the merchants' law, and the interrelations between market and non market institutions.