the cost of services that can be withheld. The same conclusion holds even at lower volumes of trade if the frequency of visits by an individual trader is low. As long as ruler-merchant relations are governed only by a bilateral reputation mechanism, theory holds that trading volume cannot expand to its efficient level.
This discussion and the formal model presented in section 4.2 allow only one kind of sanction for cheated merchants: withdrawal of trade and hence tax payment. Military action against a polity or a town in response to abuses, although sometimes used, was not generally a viable option. In the late medieval period defensive technology was superior to offensive technology, and the costs and risks of offensive military action at distant ports limited the credibility of threats of military action in response to trade violations.8
A multilateral response by all merchants to transgressions against any subgroup of merchants is a possible means of increasing the punishment and hence deterring abuses. Conditioning behavior in many ruler-merchant transactions on the ruler’s conduct in any such transaction increases the punishment following an abuse. Beliefs in such a linkage can therefore render self-enforcing the belief that a ruler will not abuse rights in a wider set of circumstances.
Indeed, the history of relations between trade centers and foreign merchants presents several examples of multilateral retaliations against rulers who reneged on their contractual obligations. Around 1050 the Muslim ruler of Sicily imposed a 10 percent tariff (instead of the 5 percent tariff specified by Islamic law) on goods imported to Sicily by the Maghribi traders. The traders responded by imposing an embargo and sending their goods to the rival trade center, Tunisia. The embargo was effective: after a year the Sicilian ruler removed the extra tariff.9
Incidents like this one suggest the relevance of a multilateral reputation mechanism in which the ruler is deterred from abusing the rights of any merchant by the threat that many others