This paper examines the economic institution that enabled 11th-century Mediterranean traders, known as Maghribi traders, to overcome the commitment problem in their agency relations with overseas agents. The study uses historical records and a game-theoretical model to explore the role of a coalition, which is defined as a group of traders whose members are expected to hire only member agents. The coalition is governed by a reputation mechanism, where expectations, implicit contractual relations, and a specific information-transmission mechanism support the operation of the coalition. The paper highlights the interaction between social and economic institutions, the determinants of business practices, the nature of the Merchants' Law, and the interrelations between market and nonmarket institutions. The historical evidence suggests that the Maghribi traders practiced multilateral punishment (MPS), where agents who cheated were ostracized until they compensated the injured, and that this MPS was self-enforcing due to the link between expectations of future hiring and the rent required to keep agents honest. The paper also discusses why seemingly profitable agency relations with non-Maghribi traders were not established, and how the coalition's governance of agency relations facilitated trade expansion.This paper examines the economic institution that enabled 11th-century Mediterranean traders, known as Maghribi traders, to overcome the commitment problem in their agency relations with overseas agents. The study uses historical records and a game-theoretical model to explore the role of a coalition, which is defined as a group of traders whose members are expected to hire only member agents. The coalition is governed by a reputation mechanism, where expectations, implicit contractual relations, and a specific information-transmission mechanism support the operation of the coalition. The paper highlights the interaction between social and economic institutions, the determinants of business practices, the nature of the Merchants' Law, and the interrelations between market and nonmarket institutions. The historical evidence suggests that the Maghribi traders practiced multilateral punishment (MPS), where agents who cheated were ostracized until they compensated the injured, and that this MPS was self-enforcing due to the link between expectations of future hiring and the rent required to keep agents honest. The paper also discusses why seemingly profitable agency relations with non-Maghribi traders were not established, and how the coalition's governance of agency relations facilitated trade expansion.