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Defining Trust Using Expected Utility Theory

  • Arai, Kazuhiro
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    Trust has been discussed in many social sciences including economics, psychology, and sociology. However, there is no widely accepted definition of trust. Inparticular, there is no definition that can be used for economic analysis. This paper regards trust as expectation and defines it using expected utility theory together with concepts such as betrayal premium. In doing so, it rejects the widely accepted black-and-white view that (un) trustworthy people are always (un)trustworthy. This paper also discusses various determinants and properties of trust on the basis of the idea that trust is not simply a matter of intention.

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    File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/18045/1/HJeco0500200990.pdf
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    Article provided by Hitotsubashi University in its journal Hitotsubashi Journal of Economics.

    Volume (Year): 50 (2009)
    Issue (Month): 2 (December)
    Pages: 99-118

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    Handle: RePEc:hit:hitjec:v:50:y:2009:i:2:p:99-118
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    1. Fehr, Ernst & Schmidt, Klaus M., . "A theory of fairness, competition, and cooperation," Chapters in Economics, University of Munich, Department of Economics.
    2. Iris Bohnet & Fiona Greig & Benedikt Herrmann & Richard Zeckhauser, 2007. "Betrayal Aversion: Evidence from Brazil, China, Oman, Switzerland, Turkey, and the United States," Discussion Papers 2007-08, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    3. Bohnet, Iris & Zeckhauser, Richard, 2003. "Trust, Risk and Betrayal," Working Paper Series rwp03-041, Harvard University, John F. Kennedy School of Government.
    4. Ernst Fehr, 2008. "On the Economics and Biology of Trust," SOEPpapers on Multidisciplinary Panel Data Research 154, DIW Berlin, The German Socio-Economic Panel (SOEP).
    5. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
    6. Hong, Kesseley & Bohnet, Iris, 2004. "Status and Distrust: The Relevance of Inequality and Betrayal Aversion," Working Paper Series rwp04-041, Harvard University, John F. Kennedy School of Government.
    7. Lazaric Nathalie & Lorenz Edward, 1998. "Trust and Economic Learning," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 8(2-3), pages 10, June.
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