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Trust and trustworthiness reputations in an investment game

  • Charness, Gary
  • Du, Ninghua
  • Yang, Chun-Lei

Trust is an essential component of good social outcomes and effective economic performance. Reputation on the trustee's past behavior in the same role has proven to be greatly effective at raising the level of trust. In this study, we show that providing information on the trustee's past behavior as the trustor is equally effective as a reputation system. In fact, people still find it worthwhile to invest in a reputation as a trusting person, even though the immediate payoff for trusting is poor. This confirms the role of indirect reciprocity as a strategic notion based on reputation, whereby pro-social actions by one person towards a second person are sanctioned by a third party.

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Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 72 (2011)
Issue (Month): 2 (June)
Pages: 361-375

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Handle: RePEc:eee:gamebe:v:72:y:2011:i:2:p:361-375
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622836

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  3. John Duffy & Huan Xie & Yong-Ju Lee, 2008. "Social Norms, Information and Trust among Strangers: Theory and Evidence," Working Papers 08007, Concordia University, Department of Economics, revised Jul 2001.
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  12. Altmann, Steffen & Dohmen, Thomas & Wibral, Matthias, 2008. "Do the reciprocal trust less?," Economics Letters, Elsevier, vol. 99(3), pages 454-457, June.
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  17. Bolton, Gary E. & Katok, Elena & Ockenfels, Axel, 2005. "Cooperation among strangers with limited information about reputation," Journal of Public Economics, Elsevier, vol. 89(8), pages 1457-1468, August.
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