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Caravans may ignore adjacent enemy units during movement. They have no maintenance cost and do not cause unhappiness when away from their home city under Republic and Democracy. Caravans can establish trade routes between cities that are at least 10 squares apart. They can assist in the construction of Wonders.
If the caravan enters a domestic city building a wonder, it can add its 50 shields to the building process. This allows the caravan's home city to contribute to the rapid construction of an important wonder.
If the caravan enters a foreign city, it will automatically begin a trade route. If it enters a domestic city at least 10 squares away from its home, it will be given the option to create a trade route or to continue moving. Creating a trade route always produces a windfall of free cash and research. The additional cash is equal to (Distance between the Cities + 10) * (Trade Arrows of the 2 Cities) / 24. This windfall is halved if the cities are on the same continent or if they are the same civilization; the windfall is reduced by ⅓ if the player has railroads or if the player has flight. (If all four conditions are true, the windfall is thus 1/9 of the basic formula.)
The trade route can also permanently increase the trade arrows of the home city. This permanent bonus changes over time with the trade arrows of the two cities. It is equal to (Trade Arrows of the 2 Cities + 4) / 8. This bonus is halved if the cities are the same civilization, but other factors have no effect. (The original manual of the game incorrectly states that the distance between the cities affects this permanent bonus; distance only affects the initial windfall of cash and research.)
If a city has created four or more trade routes, only the three most lucrative are kept and added to its trade; others can provide the initial bonus, but will not affect the city's number of trade arrows. Trade is not bilateral: the target city does not automatically receive a trade route with the caravan's home; it must create its own caravan to create a trade route in the other direction.
Each caravan counts towards the civilization's limit of 127 units. The caravan disappears after it has been used to build a wonder or to create a trade route.
Trade has been a major source of income to civilizations throughout history. Journeying to distant lands, Caravans exchanged their loads of goods for money or other items of value, leaving both parties better off. In addition, the traders who accompanied the Caravans often brought back new knowledge about the advances made by their contacts. Such a person was Marco Polo, who went with traders to China, stayed there for many years, and brought back much valuable information to the West.