This chapter analyses the issue of specialization among craftsmen and traders within and between cities. Focusing particularly on epigraphic and documentary evidence from Egypt and Asia Minor, it investigates three incentives for specialization: first, the intense competition on the market, which drove craftsmen to explore economic niches that would give them a decent customer base; second, the possibility to increase the quality and quantity of their output by focusing on a smaller subset of services or products, and, third, location factors—the specific local circumstances, such as the availability of certain resources, that caused certain places to have a high concentration of particular crafts. It is argued that the market—and particularly consumer demand—was the main driving force for specialization: the evidence illustrates Adam Smith’s observation that the extent to which specialization took place depended on the size of the market.