On the Reliability of Trusting
AbstractThis paper presents a model of trust in which a principal chooses either to trust or monitor an agent who, in turn, chooses either to honor or exploit that trust. The principal's decision of whether to trust or monitor is based on the relative temptation an agent faces to exploit the principal's trust, which comprises two elements – the environmental incentives the agent faces and the personal characteristics of the agent. The model is used to develop a reliability condition that the principal uses to assess the likelihood that trust placed in an agent will be honored.
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Bibliographic InfoPaper provided by EconWPA in its series Microeconomics with number 0202002.
Length: 35 pages
Date of creation: 04 Feb 2002
Date of revision:
Note: Type of Document - Microsoft Word; prepared on IBM PC; to print on HP; pages: 35; figures: 4. Figures embedded as metafiles in document
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trust; trustworthiness; principal-agent relationship; moral hazard; transaction costs; monitoring;
Find related papers by JEL classification:
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-02-10 (All new papers)
- NEP-HPE-2002-02-15 (History & Philosophy of Economics)
- NEP-PKE-2002-02-15 (Post Keynesian Economics)
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