A tragedy chronicles the progressive and ultimate downfall of someone, the tragic hero, who has enjoyed money, power, and/or prestige. This is exactly what happens to Shylock in Shakespeare's The Merchant of Venice. Although Shylock is despised by Christians for being a Jew, he has a lucrative lending business, a daughter, a home, and religious community that he stands to lose. Tragedies can also reveal societal flaws, which in this case is the prejudice expressed throughout the play from all sides.
Another element of a tragedy is that the tragic hero has a tragic flaw which is the major reason for his fall from his high status. Shylock's tragic flaw could be his vengeful spirit that refuses to renegotiate the terms of Antonio's bond. His flaw could be his stubbornness to love his daughter properly; or his reciprocal prejudice against Christians; or all of these vices combined which make Shylock bitter, undiplomatic and hateful. Whatever the flaw, the Duke pronounces his judgment upon Shylock at the end of the hearing as follows:
"I pardon thee thy life before thou ask it.
For half thy wealth, it is Antonio's.
The other half comes to the general state" (IV.i.364-366).
Shylock is shocked that his home and business are taken from him, but things get worse when Portia asks what mercy Antonio will show him. Antonio says that he would rather have his half of Shylock's money and goods go to the man who married Shylock's daughter, Lorenzo, and that Shylock "presently become a Christian" (IV.i.382).
In the end, Shylock, who once had money, family, and religion loses them all. Because he showed no mercy towards others, he seems to receive none in the end. Although most tragic heroes die at the end of the play, Shylock is lucky to escape with his life, but he must now live a poor Christian life alone with his regrets.