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Networks, Trust and Institutional Complementarities

Author

Listed:
  • Marcello Basili

    () (Università di Siena)

  • Cristina Duranti

    () (Università di Firenze)

  • Maurizio Franzini

    () (Universtà di Roma "La Sapienza")

Abstract

This paper provides a contribution to the definition of endogenous conditions that induce cooperative behaviour and trust in a principal-agent model with adverse selection. Differently from the standard literature, the paper shows that the principal can actively generate trust and cooperation by the agent. It is assumed that the latter's utility function includes self-esteem among its variables. Therefore when the principal pays a gift or a monetary transfer of adequate magnitude, failure to reciprocate generates disutility to the agent. The optimal contract with trust, thus defined, is com-pared with alternative solution and the role of complementary institutions is stressed.

Suggested Citation

  • Marcello Basili & Cristina Duranti & Maurizio Franzini, 2004. "Networks, Trust and Institutional Complementarities," Rivista di Politica Economica, SIPI Spa, vol. 94(1), pages 159-180, January-F.
  • Handle: RePEc:rpo:ripoec:v:94:y:2004:i:1:p:159-180
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    References listed on IDEAS

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    1. Bresnahan, Timothy F. & Trajtenberg, M., 1995. "General purpose technologies 'Engines of growth'?," Journal of Econometrics, Elsevier, pages 83-108.
    2. Robert E. Hall, 2001. "The Stock Market and Capital Accumulation," American Economic Review, American Economic Association, vol. 91(5), pages 1185-1202, December.
    3. Lindbeck, Assar & Snower, Dennis J., 2003. "The Firm as a Pool of Factor Complementarities," IZA Discussion Papers 882, Institute for the Study of Labor (IZA).
    4. Milgrom, Paul & Roberts, John, 1995. "Complementarities and fit strategy, structure, and organizational change in manufacturing," Journal of Accounting and Economics, Elsevier, vol. 19(2-3), pages 179-208, April.
    5. Robert J. Gordon, 2000. "Does the "New Economy" Measure Up to the Great Inventions of the Past?," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 49-74, Fall.
    6. Nathalie Greenan & Dominique Guellec, 1998. "Firm Organization, Technology And Performance: An Empirical Study," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 6(4), pages 313-347.
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    Citations

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    Cited by:

    1. Gagliardi, Francesca, 2008. "Institutions and economic change: A critical survey of the new institutional approaches and empirical evidence," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 37(1), pages 416-443, February.
    2. Marcello Basili & Maurizio Franzini, 2009. "Cooperation, Reciprocity and Self-esteem: A Theoretical Approach," Chapters,in: The Economics of Ethics and the Ethics of Economics, chapter 11 Edward Elgar Publishing.
    3. Marcello Basili & Maurizio Franzini, 2005. "Cooperation and Reciprocity: a Theoretical Approach," Working Papers 91, University of Rome La Sapienza, Department of Public Economics.
    4. Francesca Gagliardi, 2009. "Financial development and the growth of cooperative firms," Small Business Economics, Springer, vol. 32(4), pages 439-464, April.

    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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