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Building Trust

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  • Saikat Datta

Abstract

In this paper we show slow trust building in social relationships in a model of complete information. This model is in contrast to the asymmetric information settings in 'reputation' models of slow trust building. We look at a society of borrowers and lenders who interact over time; a borrower has a short term incentive to cheat (run away with the money). In a symmetric social equilibrium which is maximal in terms of payoff for the lender side of the population, we show that average trust builds up slowly and is non-decreasing.

Suggested Citation

  • Saikat Datta, 1996. "Building Trust," STICERD - Theoretical Economics Paper Series /1996/305, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    • Handle: RePEc:cep:stitep:/1996/305
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    File URL: https://sticerd.lse.ac.uk/dps/te/te305.pdf
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    Cited by:

    1. Rauch, James E. & Watson, Joel, 2003. "Starting small in an unfamiliar environment," International Journal of Industrial Organization, Elsevier, vol. 21(7), pages 1021-1042, September.
    2. Pin, Paolo & Rogers, Brian W., 2015. "Cooperation, punishment and immigration," Journal of Economic Theory, Elsevier, vol. 160(C), pages 72-101.
    3. James Andreoni & Michael A. Kuhn & Larry Samuelson, 2016. "Starting Small: Endogenous Stakes and Rational Cooperation," NBER Working Papers 21934, National Bureau of Economic Research, Inc.

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