Sustained long-distance trade requires that reneging on agreements be unprofitable.

Evidence

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

Categorization

• DEEPTHINKING: The claim that decentralized interstate trade is fragile unless reputation costs outweigh cheating gains is a foundational condition that frames the whole institutional design problem.
• XREF: connects to: Long-distance trade needs institutions to fill knowledge gaps about others’ honesty; Trade institutions must solve both an information and a punishment-motivation problem; Frequent repeated interaction makes cooperative trade equilibria feasible, whereas infrequent trade does not. (+2 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 0.85)
• Some enforcement costs are unavoidable for sustaining honest exchange. (similarity 0.81)

Broader Connections

• Trade institutions must solve both an information and a punishment-motivation problem #expands (0.88)
• Frequent repeated interaction makes cooperative trade equilibria feasible, whereas infrequent trade does not. #expands (0.85)