Coordination,Commitment,and Enforcement:The Case of the Merchant Guild Avner Greif,Paul Milgrom,and Barry R.Weingast Stanford University We interpret historical evidence in light of a repeated-game model to conclude that merchant guilds emerged during the late medieval period to allow rulers of trade centers to commit to the security of alien merchants.The merchant guild developed the theoretically required attributes,secured merchants'property rights,and evolved in response to crises to extend the range of its effectiveness,contrib- uting to the expansion of trade during the late medieval period.We elaborate on the relations between our theory and the monopoly theory of merchant guilds and contrast it with repeated-game theo- ries that provide no role for formal organization. One of the central questions about the institutional foundations of markets concerns the power of the state.The simplest economic view of the state as an institution that enforces contracts and property rights and provides public goods poses a dilemma:A state with suffi- This paper was originally prepared for the conference on Economic Policy in Politi- cal Equilibrium,June 14-16,1990.We thank Yoram Barzel,Douglass C.North,Jean- Laurent Rosenthal,Nathan Sussman,and an anonymous referee for helpful com- ments;Esther-Mirjam Sent and Joshua Gans for editorial assistance;and the National Science Foundation for financial support.The participants at the conference on Mar- kets and Organizations organized by the Center for Economic Research at Tilburg and seminar participants at the University of California at Berkeley,Boston University, Indiana University,the University of Illinois at Urbana-Champaign,Harvard Univer- sity,the Hebrew University,Stanford University,and Tel-Aviv University contributed helpful comments. [Jourmal of Political Economy.1994,voL 102.no.4] 1994 by The University of Chicago.All rights reserved.0022-3808/94/0204-000350150 745Coordination, Commitment, and Enforcement: The Case of the Merchant Guild Avner Greif, Paul Milgrom, and Barry R. Weingast Stanford University We interpret historical evidence in light of a repeated-game model to conclude that merchant guilds emerged during the late medieval period to allow rulers of trade centers to commit to the security of alien merchants. The merchant guild developed the theoretically required attributes, secured merchants' property rights, and evolved in response to crises to extend the range of its effectiveness, contrib￾uting to the expansion of trade during the late medieval period. We elaborate on the relations between our theory and the monopoly theory of merchant guilds and contrast it with repeated-game theo￾ries that provide no role for formal organization. One of the central questions about the institutional foundations of markets concerns the power of the state. The simplest economic view of the state as an institution that enforces contracts and property rights and provides public goods poses a dilemma: A state with suffi￾This paper was originally prepared for the conference on Economic Policy in Politi￾cal Equilibrium, June 14-16, 1990. We thank Yoram Barzel, Douglass C. North, Jean￾Laurent Rosenthal, Nathan Sussman, and an anonymous referee for helpful com￾ments; Esther-Mirjam Sent and Joshua Gans for editorial assistance; and the National Science Foundation for financial support. The participants at the conference on Mar￾kets and Organizations organized by the Center for Economic Research at Tilburg and seminar participants at the University of California at Berkeley, Boston University, Indiana University, the University of Illinois at Urbana-Champaign, Harvard Univer￾sity, the Hebrew University, Stanford University, and Tel-Aviv University contributed helpful comments. [Journal of Political Economy, 1994, vol. 102, no. 4] K 1994 by The University of Chicago. All rights reserved. 0022-3808/94/0204-0003$01.50 745