This study examines the economic institutions that governed tax-farming contracts in the Ottoman Empire between 1550 and 1800. Utilizing institutional and game-theoretic frameworks, it analyzes the strategic interactions between the state and its agents under conditions of weak commitment and asymmetric information. In contrast to Western Europe, where corporate fiscal entities and long-term partnerships ensured credible commitment, the Ottoman system depended on individualized short-term contracts that lacked organizational continuity. Although this arrangement generated short-term revenue, it discouraged investment in administrative capacity and sustained cooperation, resulting in a low efficiency equilibrium. The study further addresses a central paradox in business history: whether the absence of corporate fiscal organization in the Ottoman context was due to enduring Islamic commercial traditions such as mudaraba, or the restrictive institutional design of tax-farming contracts. By elucidating this paradox, this study clarifies how institutional rigidity and monopolized fiscal authority impeded the emergence of long-lived business organizations.
Altay et al. (Wed,) studied this question.