This paper assesses the various means by which regulators and transacting parties within local medieval markets sought to overcome the problems of asymmetric information. The fundamental issue, that one party to a commercial transaction possessed greater market knowledge than the other, was seemingly well known within medieval thought. For example, ... (Show more)
This paper assesses the various means by which regulators and transacting parties within local medieval markets sought to overcome the problems of asymmetric information. The fundamental issue, that one party to a commercial transaction possessed greater market knowledge than the other, was seemingly well known within medieval thought. For example, Thomas Aquinas notably reassessed Cicero’s dilemma whether a grain merchant should disclose their knowledge of incoming supplies at a time of scarcity. More broadly, medieval moralists expressed concern that sellers might take advantage of ignorant buyers in what was known as ‘lyther bargaining’. Public spot markets in themselves were, of course, a means to aggregate information for transacting parties. However, the need for commercial confidence required market officials to promote information symmetry, or a simulacrum of it, in a range of other ways.
The corollary was that many skilled trades, particularly those allied through a guild, saw asymmetrical information as potentially desirable and thus protected their specialised knowledge from outsiders. However, there was equally recognition that certain types of information asymmetry (eg. regarding quality, credit) had the potential to disrupt guild business, akin to Akerlof’s ‘lemons’ model that leads to adverse selection and even market failure (Akerlof 1970).
Such issues concerning the flow of medieval market information have been previously discussed in relation to impersonal exchange/credit in international markets (eg. Greif 1993, 2006), the grain trade (Kowaleski 1996, Davis 2018) and brokerage (Reyerson 2002, Boerner 2016). However, other formal and informal efforts to manage information flow within local medieval markets have received less attention, despite an understanding that these could lower concomitant search and bargaining costs.
This paper provides a preliminary assessment of what we know about the mechanisms of information flow within and between medieval English markets, drawing upon civic ordinances, guild regulations and associated cases. It demonstrates that contemporaries had a clear sense of the value of market and price-making information, sometimes preventing its dissemination beyond the town or guild, stipulating oaths of secrecy, or punishing collusion with outsiders. There were undoubtedly strong vested interests within medieval markets and towns. For example, there has been a tendency among scholars to assert that guild monopoly reinforced information asymmetry (Munro 1990, Richardson 2004, Ogilvie 2004, 2008, 2011). Yet, guild regulations also show that their members understood the importance of quality warranty in order to maintain premium prices (cf. Akerlof 1970). More broadly, there were formal efforts to increase the spread of information upon certain commodities (especially foodstuffs) in relation to price, weights and measures, quality standards and creditworthiness, both within and beyond the marketplace. Such dissemination was achieved through public ordinances, messengers, criers, pledging and brokerage, but also through public ritual and informal networks. Arguably, the ability to manage information flows effectively, despite the constraints of vested interests and limited enforcement options, was fundamental to the success of a medieval market. (Show less)