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

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  • Gorobets, A.
  • Nooteboom, B.

    (Tilburg University, Center for Economic Research)

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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Bibliographic Info

Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2005-39.

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

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Web page: http://center.uvt.nl

Related research

Keywords: Agent-based computational economics; Inter-firm relations; Transaction costs; Governance; Trust; Complex adaptive systems;

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  1. 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(4), pages 4.
  2. Leigh TESFATSION, 1995. "A Trade Network Game With Endogenous Partner Selection," Economic Report 36, Iowa State University Department of Economics.
  3. 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.
  4. Arthur, W Brian, 1991. "Designing Economic Agents that Act Like Human Agents: A Behavioral Approach to Bounded Rationality," American Economic Review, American Economic Association, vol. 81(2), pages 353-59, May.
  5. 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.
  6. 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(3), pages 1.
  7. Andreas Diekmann & Wojtek Przepiorka, 2005. "The Evolution of Trust and Reputation: Results from Simulation Experiments," Experimental 0508005, EconWPA.
  8. 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.
  9. 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.
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Cited by:
  1. Nooteboom, B., 2006. "Human Nature in the Adaptation of Trust," Discussion Paper 2006-37, Tilburg University, Center for Economic Research.
  2. Nooteboom, B., 2006. "Forms, Sources and Processes of Trust," Discussion Paper 2006-40, Tilburg University, Center for Economic Research.

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