According to Herodotus, there is a race of men located
……..beyond the Pillars of Hercules, which the Carthaginians are wont to visit, where they no sooner arrive but forthwith they unlade their wares, and, having disposed them after an orderly fashion along the beach, leave them, and, returning aboard their ships, raise a great smoke. The natives, when they see the smoke, come down to the shore, and, laying out to view so much gold as they think the worth of the wares, withdraw to a distance. The Carthaginians upon this come ashore and look. If they think the gold enough, they take it and go their way; but if it does not seem to them sufficient, they go aboard ship once more, and wait patiently. Then the others approach and add to their gold, till the Carthaginians are content. Neither party deals unfairly by the other: for they themselves never touch the gold till it comes up to the worth of their goods, nor do the natives ever carry off the goods till the gold is taken away.
Trade, if Herodotus is to be believed, takes place with neither sight nor sound of the other. Hence, the term silent trade or dumb barter. Ibn Battuta, the 14th century explorer, relates that on the Volga River he was told of a land of darkness, forty days journey hence where those
who go there do not know whom they are trading with or whether they be jinn or men, for they never see anyone.
An Italian prelate, Paulus Jovius, reports silent trade was common among the Lapps, writing
They bargain with simple faith with absent and unknown men.
Taking these and other accounts at face value raise at least three questions:
1) If the accounts are to be believed and trade is anonymous, why doesn’t one or the other party `defect’ and steal the goods offered by the other?
2) If trade was mutually profitable and longstanding wouldn’t this be an inducement to communication?
3) How do the parties decide the location of the `trading post’ in the absence of communication?
I cannot see an obvious answer to at least two of these questions, and for this reason would expect that any account of silent trade be greted with skepticism. Indeed, some historians argue that the silent trade described by Herodotus and others may be a myth (see for example de Moraes Farias, but his focus is on Africa). If so, why are such tales passed on uncritically? Amazingly, there are instances of merchants sinking princely sums in schemes to participate in such trades based on these tales. The most famous of these are the attempts by Europeans to participate in the silent trade of Wangarra.
Setting aside the veracity of these accounts, one can still ask inquire an institution such as silent trade is even plausible. A starting point, perhaps, might be Kandori (RES 1992) and Ellison (RES 1994). We have an infinitely repeated game where, in each period, players from two communities are randomly and anonymously matched to play the prisoner’s dilemma (PD). Each player observes only the actions played in his own match and nothing more. Interestingly, cooperation can be sustained through community enforcement. If a player is matched with a rival who defects, he punishes all future rivals by switching to defection forever. In this way, information that someone has defected spreads until there is a complete breakdown in trade (how to do this for games other than the PD is discussed in Deb & Gonzalez-Diaz). Indeed, at least one historical account reports a complete cessation in trade for three years in response to a `defection’. So, it appears the first of the questions I listed above may have an answer. The second question, I have not the wit to answer. The third invites an analogy to coordination games. The historical accounts suggest that river banks are a popular choice because they operated as a natural border between different communities. However, river banks are not the only focal points.