MEDIEVAL MATCHING MARKETS by Lars Boerner and Daniel Quint

 As I'll explain below, here's a long-awaited paper that fully qualifies for that description:

MEDIEVAL MATCHING MARKETS by Lars Boerner and Daniel Quint, International Economic Review, First published: 15 July 2022 https://doi.org/10.1111/iere.12600

Abstract: We study the regulation of brokerage in wholesale markets in premodern Central Western Europe. Examining 1,804 sets of rules from 82 cities, we find brokerage was primarily a centralized matchmaking mechanism. Brokerage was more common in towns with larger populations, better access to sea ports and trade routes, and greater political autonomy. Brokers' fee structures varied systematically: price-based fees were more common for highly heterogeneous goods, quantity-based fees for more homogeneous goods. We show theoretically that this was broadly consistent with total surplus maximization, and that brokerage was more valuable in markets with unequal numbers of buyers and sellers.

...

"We investigate how societies organized markets and whether their market policies were well designed to have a positive effect on welfare. We look at one important type of regulated allocation process, the organization of intermediation in the form of brokerage, primarily in wholesale markets. Regulated intermediation first appeared in European towns during the second half of the 13th century. Early regulations can particularly be found in Italy and the Lower Countries (van Houtte, 1936; Rezzara, 1903). However, a comprehensive quantitative study on the origin, spread and development of the brokerage institution is missing so far. Origins of brokerage have been linked to the urbanization process of the 13th century (van Houtte, 1936); whether it can be related to preceding medieval Arabic merchant institutions or Roman law is an open debate (van Houtte, 1936; Lieber, 1968).

"We study 231 cities in Central and Western Europe, roughly in the area of the Holy Roman Empire north of the Alps, during the period from 1200 to 1700. This area and period are particularly appealing for empirical investigation because local municipalities were typically economically and politically autonomous. Thus, each city could implement its own types of regulations and allocation mechanisms, leading to potentially rich variation in detail.

"We identify cities with (and without) brokerage regulations and find in cities with regulations a dominant brokerage design with specific combinations of rules. The dominant design was a sort of centralized matchmaking mechanism: a few licensed brokers specializing in a particular product were given the exclusive right to offer a service pairing mainly foreign merchants with local buyers, and their behavior was strictly regulated. Brokers were not allowed to do any business on their own behalf and were restricted in what information they could disclose. The brokerage service was open to everybody, to the rich and poor, and to foreign and local merchants. Brokers received a predefined fee based on the transactions they generated—most commonly either a fixed fee per unit traded or a fixed fraction of the sales price."

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I normally don't blog about papers twice, i.e. if I've blogged about the working paper I don't blog again about the published paper.  But this one has changed since I first blogged about it, and it implicitly tells us something about the current (but still medieval) publication system in Economics, since that was more than a decade ago. Here's the earlier (2011) blog.

Wednesday, February 16, 2011

Medieval Matching Markets