A Companion to the Hanseatic League

188 Ewert and Selzer

trading activities could be repeated infinitely,66 this defect in principle could
be removed by common cultural bonds and mutual trust, because reputation
R of merchants was an even stronger means to enforce a reciprocal fair com-
portment (see Figure 5.4b).
Therefore, being a reliable trader of high standing was essential to all mem-
bers of a network. Keeping this reputation was a strong incentive to follow
the network rules. Losing it by cheating or betrayal not only undermined a
particular bilateral relationship, it also automatically meant losing access to an
entire network and thus losing possible future partnerships as well. Because of

66 Assuming infinity of repetitions is plausible insofar as both partners in reality do not
know when exactly their exchange relationship would come to an end.

figure 5.4 Game Theoretical Analysis of Hanseatic Reciprocal Trade: Game-theoretical model
of reciprocal trade: P = profit of sale; CA = costs of sending goods to B; R = Reputation
(R > P). (a) One-shot situation without incentives for B to act fair; (b) situation of
repeated games with accounting for B’s losses of reputation in the event of cheating A.
Source: Calculated and created by Ulf Christian Ewert and Stephan
Selzer.

merchant A

(‟principal”)

sending goods to B

not sending goods to

B

selling goods for

A

not compensating A

merchant B

(‟agent”)

A B

[0, 0]

(a)

A B

[P, 0]

A B

[-CA, P]

merchant A

(‟principal”)

sending goods to B

not sending goods to

B

selling goods for

A

not compensating A

merchant B

(‟agent”)

A B

[0, 0]

(b)

A B

[P, 0]

A B

[-CA, P-R]