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Adaptive build-up and breakdown of trust: an agent based computational approach

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Author Info
Gorobets, Alexander
Nooteboom, Bart (Tilburg University, Center for Economic Research)

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Abstract

This article employs Agent-Based Computational Economics (ACE) to investigate whether, and under what conditions, trust is viable in markets. The emergence and breakdown of trust is modeled in a context of multiple buyers and suppliers. Agents develop trust in a partner as a function of observed loyalty. They select partners on the basis of their trust in the partner and potential profit, with adaptive weights. On the basis of realized profits, they adapt the weight they attach to trust relative to profitability, and their own trustworthiness, modeled as a threshold of defection. Trust and loyalty turn out to be viable under fairly general conditions.

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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 39.

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Date of creation: 2005
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Handle: RePEc:dgr:kubcen:200539

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Find related papers by JEL classification:
C63 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Computational Techniques
L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
P13 - Economic Systems - - Capitalist Systems - - - Cooperative Enterprises

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Holland, John H & Miller, John H, 1991. "Artificial Adaptive Agents in Economic Theory," American Economic Review, American Economic Association, vol. 81(2), pages 365-71, May. [Downloadable!] (restricted)
  2. Arthur, W Brian, 1993. "On Designing Economic Agents That Behave Like Human Agents," Journal of Evolutionary Economics, Springer, vol. 3(1), pages 1-22, February.
  3. Kirman, Alan P. & Vriend, Nicolaas J., 2001. "Evolving market structure: An ACE model of price dispersion and loyalty," Journal of Economic Dynamics and Control, Elsevier, vol. 25(3-4), pages 459-502, March. [Downloadable!] (restricted)
  4. Wendelin Reich, 2004. "Reasoning About Other Agents: a Plea for Logic-Based Methods," Journal of Artificial Societies and Social Simulation, Journal of Artificial Societies and Social Simulation, vol. 7. [Downloadable!]
  5. Andreas Diekmann & Wojtek Przepiorka, 2005. "The Evolution of Trust and Reputation: Results from Simulation Experiments," Experimental 0508005, EconWPA. [Downloadable!]
  6. Klos, Tomas B. & Nooteboom, Bart, 2001. "Agent-based computational transaction cost economics," Journal of Economic Dynamics and Control, Elsevier, vol. 25(3-4), pages 503-526, March. [Downloadable!] (restricted)
  7. David Brichoux & Paul E. Johnson, 2002. "The Power of Commitment in Cooperative Social Action," Journal of Artificial Societies and Social Simulation, Journal of Artificial Societies and Social Simulation, vol. 5. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Nooteboom, Bart, 2006. "Human nature in the adaptation of trust," Discussion Paper 37, Tilburg University, Center for Economic Research. [Downloadable!]
  2. Nooteboom, Bart, 2006. "Forms, sources and processes of trust," Discussion Paper 40, Tilburg University, Center for Economic Research. [Downloadable!]
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