190 Ewert and Selzer
were due to these commitments. Common costs could be produced because
single members of a commercial network could attempt to take the network
services for free and to externalize private costs to the network community.
Why did Hanseatic merchants prefer this pattern of trade? By participating in
a commercial network, each must have gained personal profits, at least in the
long run; otherwise there would not have been any incentive for participation
at all. Choosing a network structure for trade reduced the costs significantly.71
This saving can be split into reductions of transaction, information, and orga-
nization costs. And with reciprocal trade, Hansards had a powerful tool against
the classic problems that occur in principal-agent relationships, also known as
“adverse selection” and “moral hazard”.72
Probably the best-known benefit of a network structure is its ability to
decrease transaction costs significantly. This cost reduction mainly stemmed
from network members acting in accordance with the same set of norms; even
more so because many of them were members of the same family or were just
friends. Mutual commercial transactions were facilitated. Stable sets of part-
nerships reduced transaction costs as well because merchants then already
knew what could be expected from a particular trading partner. Due to the
commercial networks’ core principle of construction, legally independent
merchants had to voluntarily cooperate. In general, each partner had the
same interests and they could trust each other’s determination to keep to the
partnership.
71 The role particular institutions played for the reduction of transaction costs and thus
could enhance trade and economic growth in medieval Europe was analyzed in numer-
ous studies, for example by North and Greif. Douglass C. North, Structure and Change in
Economic History (New York: Norton, 1981); Id., “Transaction Costs in History,” Journal of
European Economic History 14 (1985), 557–576; Id., Institutions, Institutional Change and
Economic Performance (Cambridge: Cambridge University Press, 1990); Id., “Institutions
and Credible Commitment,” Journal of Institutional and Theoretical Economics 149
(1993), 11–23; Avner Greif, “Institutions and Impersonal Exchange: From Communal to
Individual Responsibility,” Journal of Institutional and Theoretical Economics 158 (2002),
168–204; Id., Institutions and the Path to the Modern Economy: Lessons from Medieval
Trade (Cambridge: Cambridge University Press, 2006). See also John H. Munro, “The
‘New Institutional Economics’ and the Changing Fortunes of Fairs in Medieval and Early
Modern Europe: the Textile Trade, Warfare, and Transaction Costs,” Vierteljahrschrift für
Sozial- und Wirtschaftsgeschichte 88 (2001), 1–47.
72 Selzer and Ewert, “Verhandeln und Verkaufen” (see footnote 39), 135–161, 151–152; Iid., “Die
Neue Institutionenökonomik als Herausforderung an die Hanseforschung,” Hansische
Geschichtsblätter 123 (2005), 7–29, 28; Ewert and Selzer, “Wirtschaftliche Stärke durch
Vernetzung” (see footnote 39), 55, 58–59.