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Intermediation and Trust

Author

Listed:
  • Christopher Kingston

    (Amherst College)

Abstract

It is well known that among a community of traders in which particular pairs of traders only transact occasionally, and have opportunities to cheat, cooperation be sustained if information about traders’ reputations can circulate within the group. In many applications, however, the potential for developing reputations is limited. This paper studies how intermediaries («brokers») can help to sustain cooperation by removing the need for traders to have information about each other. Rather than trusting other traders, each of whom they interact with only occasionally, traders place their trust in the broker, with whom they each interact frequently. To illustrate, we explore the role of intermediaries in bribe transactions.

Suggested Citation

  • Christopher Kingston, 2011. "Intermediation and Trust," EKONOMIAZ. Revista vasca de Economía, Gobierno Vasco / Eusko Jaurlaritza / Basque Government, vol. 77(02), pages 64-85.
    • Handle: RePEc:ekz:ekonoz:2011206
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    More about this item

    Keywords

    intermediation; trust; cooperation; broker;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy

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