What is the dramatic function of act 3, scene 1?
Act 3 Scene 1 opens with the audience learning that Antonio has lost a ship at sea, and immediately after this Shylock enters. First our sympathy is aroused for Antonio, and this is heightened by Shylock, whom Solanio refers to as the "devil." Upon learning that Shylock's daughter has fled, the friends of Antonio berate him and insult him, prodding Shylock to say in reference to Antonio's loss: "let him look to his bond." The confluence of the two events, Antonio's and Shylock's, heightens suspense and deepens our feelings for Antonio, especially when Shylock says that he will do what he wants with Antonio's pound of flesh--feed it to the fish, if he wants (3.1.52). It is at this moment that Shylock has his greatest speech in the play, and next to Portia's one of the two great speeches in the play. Signficantly, he asks for dignity and reminds Antonio's friends that he will treat others the way he is treated himself. When Portia later asks for mercy, she says it should be given "freely," not based on one is treated by others. Throughout the rest of the scene Shylock is tormented further and further by learning about his daughter leaving him, equating this with his loss of money.
It increases the complexity of Shylock's character. On the one hand, his drive for a "pound" of Antonio's flesh is accelerating, but it also shows his human side. There is a sympathetic reaction to his turmoil over the loss of his dead wife's ring, and the kidnapping of his daughter.