Long-distance trade needs institutions to fill knowledge gaps about others’ honesty

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 (#expands, via linked claim)

It is our contention that an enduring pattern of trade over a wide geographical area cannot be sustained if it is profitable for merchants to renege on promises or repudiate agreements. — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 167 (#corroborates, via linked claim)

Categorization

• XREF: connects to: Costly information, not infrequent trade, is the core obstacle to honest exchange. — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 13; Trade institutions must solve both an information and a punishment-motivation problem; Distrust requires little evidence while trust demands rich understanding of incentives (+12 more)

Related

• Long-distance trade undermines honest behavior among strangers without institutions. (similarity 0.88)
• A Law Merchant institution can sustain honest trade as an equilibrium (similarity 0.88)
• Sustained long-distance trade requires that reneging on agreements be unprofitable. (similarity 0.88)
• Costly information, not infrequent trade, is the core obstacle to honest exchange. (similarity 0.82)
• Some enforcement costs are unavoidable for sustaining honest exchange. (similarity 0.82)
• Word-of-mouth reputation alone cannot sustain honest trade. (similarity 0.80)
• Growing trade communities face monitoring and one-shot-cheating problems that demand new institutions. (similarity 0.80)
• Trade institutions must solve both an information and a punishment-motivation problem (similarity 0.79)
• Trustworthy behavior requires some information cost, but imperfect information can suffice. (similarity 0.78)
• Full-history information institutions are too costly for efficient trade (similarity 0.78)

Broader Connections

• Trade institutions must solve both an information and a punishment-motivation problem #expands (0.85)
• A Law Merchant institution can sustain honest trade as an equilibrium #expands (0.80) — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 95
• Sustained long-distance trade requires that reneging on agreements be unprofitable. #corroborates (0.80) — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 167
• Rational trust requires both trusted’s incentives and truster’s knowledge #expands (0.78)
• Trust is a small-scale phenomenon that institutions must replace to enable large-scale cooperation #expands (0.75)
• Institutional and legal constraints give people strong external incentives to be trustworthy #expands (0.72)
• Distrust requires little evidence while trust demands rich understanding of incentives #expands (0.70)
• Visible honesty signals are what keep cooperation stable in populations #exemplifies (0.70)