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Trust and Trustworthiness in an Economy with Heterogeneous Individuals

Author

Listed:
  • Peter Katuscak
  • Joel Slemrod

Abstract

We analyze the determinants of trust and trustworthiness in a matching equilibrium when agents have heterogeneous predispositions towards trusting and trustworthy behavior, there is transmission of information via both individual and collective reputations, and successful matches may persist. In new matches, more social trustworthiness breeds more individual trust. However, whether more social trust breeds more or less individual trustworthiness depends on the observability of individual histories of play. If it is low, more trust generally breeds less trustworthiness, while if it is high, more trust breeds more trustworthiness. We combine the links between social trust and trustworthiness to construct a general trust/trustworthiness equilibrium and discuss its properties.

Suggested Citation

  • Peter Katuscak & Joel Slemrod, 2006. "Trust and Trustworthiness in an Economy with Heterogeneous Individuals," CERGE-EI Working Papers wp305, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
  • Handle: RePEc:cer:papers:wp305
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    File URL: http://www.cerge-ei.cz/pdf/wp/Wp305.pdf
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    References listed on IDEAS

    as
    1. Stephen Knack & Philip Keefer, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1251-1288.
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    3. repec:cup:apsrev:v:80:y:1986:i:04:p:1095-1111_18 is not listed on IDEAS
    4. Parikshit Ghosh & Debraj Ray, 1996. "Cooperation in Community Interaction Without Information Flows," Review of Economic Studies, Oxford University Press, vol. 63(3), pages 491-519.
    5. Alesina, Alberto & La Ferrara, Eliana, 2002. "Who trusts others?," Journal of Public Economics, Elsevier, vol. 85(2), pages 207-234, August.
    6. Joel Slemrod & Peter Katuák, 2005. "Do Trust and Trustworthiness Pay Off?," Journal of Human Resources, University of Wisconsin Press, vol. 40(3).
    7. Edward L. Glaeser & David I. Laibson & José A. Scheinkman & Christine L. Soutter, 2000. "Measuring Trust," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 811-846.
      • Glaeser, Edward Ludwig & Laibson, David I. & Scheinkman, Jose A. & Soutter, Christine L., 2000. "Measuring Trust," Scholarly Articles 4481497, Harvard University Department of Economics.
    8. Chen, Yongmin, 2000. "Promises, Trust, and Contracts," Journal of Law, Economics, and Organization, Oxford University Press, vol. 16(1), pages 209-232, April.
    9. Avinash Dixit, 2003. "On Modes of Economic Governance," Econometrica, Econometric Society, vol. 71(2), pages 449-481, March.
    10. Nava Ashraf & Iris Bohnet & Nikita Piankov, 2006. "Decomposing trust and trustworthiness," Experimental Economics, Springer;Economic Science Association, vol. 9(3), pages 193-208, September.
    11. Joel Sobel, 1985. "A Theory of Credibility," Review of Economic Studies, Oxford University Press, vol. 52(4), pages 557-573.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Trust; trustworthiness; reputation.;

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory

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