A Law Merchant institution can sustain honest trade as an equilibrium

Evidence

Ar subsrage (b), if either player has failed to query the Law Merchant or if the query establishes that at least one player has an outstanding judgment, then both traders play Cheat (which we may interpret as a refusal by the honest trader to trade); otherwise, both play Honest. … Ar subsrage (c), if both parties queried at substage (a) and exactly one of the two players Cheated at substage (b), then the victim appeals to the LM; otherwise, no appeal is filed. … At subsrage (d), if a valid appeal was filed, the LM awards damages of J to the aggrieved party. … At subsrage (e), the defendant pays the judgment J if and only if he has no other outstanding judgments. — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 95

Categorization

• ADDENDUM: Relates to the mechanics of how trade-supporting institutions stabilize exchange among strangers, complementing the article on trees as infrastructure by showing another form of institutional scaffolding — here a legal-arbitration one rather than a biological one.
• XREF: connects to: Economic property rights persist independent of legal recognition; Ostracism, not state force, enforced medieval merchant law — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 31; Long-distance trade needs institutions to fill knowledge gaps about others’ honesty (+19 more)

Related

• Long-distance trade needs institutions to fill knowledge gaps about others’ honesty (similarity 0.88)
• Long-distance trade undermines honest behavior among strangers without institutions. (similarity 0.80)
• Strong incentives make the legal-merchant strategy robust to any history (similarity 0.79)

Broader Connections

• Frequent repeated interaction makes cooperative trade equilibria feasible, whereas infrequent trade does not. #expands (0.88)
• Institutional and legal constraints give people strong external incentives to be trustworthy #expands (0.85)
• Fair dealing on the Silk Road built trust that outcompeted short-term gouging #exemplifies (0.82) — , A Year of World Stories, 12019
• A continuing relationship functions as a bond deterring dishonest trading #expands (0.80)
• Markets can organize exchange without requiring high levels of trust #corroborates (0.78)
• The threat of ending an exchange is what enforces trustworthiness #qualifies (0.72)