Intermediation and Trust
It is well known that among a community of traders in which particular pairs of traders only transact occasionally, and have opportunities to cheat, cooperation be sustained if information about traders’ reputations can circulate within the group. In many applications, however, the potential for developing reputations is limited. This paper studies how intermediaries («brokers») can help to sustain cooperation by removing the need for traders to have information about each other. Rather than trusting other traders, each of whom they interact with only occasionally, traders place their trust in the broker, with whom they each interact frequently. To illustrate, we explore the role of intermediaries in bribe transactions.
Volume (Year): 77 (2011)
Issue (Month): 02 ()
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