Adaptive build-up and breakdown of trust: An agent based computational approach
AbstractThis 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 InfoPaper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2005-39.
Date of creation: 2005
Date of revision:
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Web page: http://center.uvt.nl
Agent-based computational economics; Inter-firm relations; Transaction costs; Governance; Trust; Complex adaptive systems;
Other versions of this item:
- Alexander Gorobets & Bart Nooteboom, 2006. "Adaptive Build-up and Breakdown of Trust: An Agent Based Computational Approach," Journal of Management and Governance, Springer, vol. 10(3), pages 277-306, September.
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-04-09 (All new papers)
- NEP-CBE-2005-04-09 (Cognitive & Behavioural Economics)
- NEP-CMP-2005-04-09 (Computational Economics)
- NEP-EXP-2005-04-09 (Experimental Economics)
- NEP-GTH-2005-04-09 (Game Theory)
- NEP-REG-2005-04-09 (Regulation)
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