Emergence of Property Rights Enforcement in Early Trade: A Behavioural Model Without Reputational Effects

Abstract

The present article develops a behavioural explanation for the emergence of high levels of property rights enforcement in Europe in the Middle Ages (11th to 13th centuries). The merchant guilds have a central role in our explanation. We develop an agent-based model that allows a number of important but previously unexplored issues to be considered (such as the joint importance of price variation, guild stability and the effect of uncoordinated embargo pressures among multiple guilds). We show that almost perfect levels of property rights enforcement can emerge solely as a result of multiple guilds' uncoordinated embargo pressures and medium to high levels of price variation. In fact, both conditions were fulfilled in the Middle Ages. In our model, no reputation mechanisms are required; our results solely depend on behavioural adjustment. Our main result is that high levels of property rights enforcement can emerge instead as a result of guilds' embargo pressures and medium to high levels of price variation. This explanation of the emergence of property rights enforcement complements the mechanisms emphasized in previous research.