The Resolution of Commercial Conflicts in Bruges, Antwerp, and Amsterdam (1250-1650)
Gelderblom, Oscar (Utrecht University)
Merchants in the Low Countries: The Organization of Long-Distance Trade in Bruges, Antwerp, and Amsterdam (1250-1650) (2008)
Even if merchants carefully select their trading partners and closely monitor their behavior, chances remain that the other party walks away with either goods or money. The simple reason is that trade, save spot transactions, implies a time lapse between delivery and payment. For any trader who estimates that the immediate gain from shirking exceeds the discounted value of possible future dealings, walking away is a rational choice. To prevent this, merchants need to be able to impose sanctions (financial, social, or otherwise) that raise the cost of cheating for the other party. A credibly threat with punishment will induce merchants to honour their obligations.