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The Psychological Game of Trust

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  • Martin Dufwenberg
  • Werner Gueth

    ()

Abstract

Two traditional assumptions in neo-classical economics have been material self-interest and (commonly known) decision rationality. Since there is ample contradictory empirical evidence, many recent attempts have been made to remodel the situation so that rational behavior is more in line with actual results (game fitting). Here we concentrate on intrinsic let-down aversion whose strength can depend on the relative frequency of such concerns, i.e. on a sociological aspect, and examine how these ideas apply to a game of trust. We discuss whether the flexibility of the approach is a virtue or a vice.

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Bibliographic Info

Paper provided by Max Planck Institute of Economics, Strategic Interaction Group in its series Papers on Strategic Interaction with number 2004-19.

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Length: 17 pages
Date of creation: Mar 2001
Date of revision:
Handle: RePEc:esi:discus:2004-19

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  1. Charness, Gary B & Dufwenberg, Martin, 2006. "Promises & Partnership," University of California at Santa Barbara, Economics Working Paper Series qt0127h86v, Department of Economics, UC Santa Barbara.
  2. Bolton, Gary E, 1991. "A Comparative Model of Bargaining: Theory and Evidence," American Economic Review, American Economic Association, vol. 81(5), pages 1096-136, December.
  3. Huang, Peter H & Wu, Ho-Mou, 1994. "More Order without More Law: A Theory of Social Norms and Organizational Cultures," Journal of Law, Economics and Organization, Oxford University Press, vol. 10(2), pages 390-406, October.
  4. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384, December.
  5. Ernst Fehr & Klaus Schmidt, 2000. "Theories of Fairness and Reciprocity – Evidence and Economic Applications," CESifo Working Paper Series 403, CESifo Group Munich.
  6. Berg Joyce & Dickhaut John & McCabe Kevin, 1995. "Trust, Reciprocity, and Social History," Games and Economic Behavior, Elsevier, vol. 10(1), pages 122-142, July.
  7. Guth, Werner, 1995. "An Evolutionary Approach to Explaining Cooperative Behavior by Reciprocal Incentives," International Journal of Game Theory, Springer, vol. 24(4), pages 323-44.
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