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Defining Trust Using Expected Utility Theory

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  • Arai, Kazuhiro
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    Abstract

    Trust has been discussed in many social sciences including economics, psychology, and sociology. However, there is no widely accepted definition of trust. Inparticular, there is no definition that can be used for economic analysis. This paper regards trust as expectation and defines it using expected utility theory together with concepts such as betrayal premium. In doing so, it rejects the widely accepted black-and-white view that (un) trustworthy people are always (un)trustworthy. This paper also discusses various determinants and properties of trust on the basis of the idea that trust is not simply a matter of intention.

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    File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/18045/1/HJeco0500200990.pdf
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    Bibliographic Info

    Article provided by Hitotsubashi University in its journal Hitotsubashi Journal of Economics.

    Volume (Year): 50 (2009)
    Issue (Month): 2 (December)
    Pages: 99-118

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    Handle: RePEc:hit:hitjec:v:50:y:2009:i:2:p:99-118

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    Keywords: Definitions of Trust; Distrust Premium; Betrayal Premium; Properties of Trust; Expected Utility Theory;

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    1. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
    2. Iris Bohnet & Fiona Greig & Benedikt Herrmann & Richard Zeckhauser, 2007. "Betrayal Aversion: Evidence from Brazil, China, Oman, Switzerland, Turkey, and the United States," Discussion Papers 2007-08, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    3. Fehr, Ernst & Schmidt, Klaus M., 1999. "A theory of fairness, competition, and cooperation," Munich Reprints in Economics 20650, University of Munich, Department of Economics.
    4. Bohnet, Iris & Zeckhauser, Richard, 2003. "Trust, Risk and Betrayal," Working Paper Series rwp03-041, Harvard University, John F. Kennedy School of Government.
    5. Fehr, Ernst, 2008. "On the Economics and Biology of Trust," IZA Discussion Papers 3895, Institute for the Study of Labor (IZA).
    6. Hong, Kessely & Bohnet, Iris, 2007. "Status and distrust: The relevance of inequality and betrayal aversion," Journal of Economic Psychology, Elsevier, vol. 28(2), pages 197-213, April.
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