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The Psychological Game of Trust

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  • Martin Dufwenberg
  • Werner Gueth

Abstract

Two traditional assumptions in neo-classical economics have been material self-interest and (commonly known) decision rationality. Since there is ample contradictory empirical evidence, many recent attempts have been made to remodel the situation so that rational behavior is more in line with actual results (game fitting). Here we concentrate on intrinsic let-down aversion whose strength can depend on the relative frequency of such concerns, i.e. on a sociological aspect, and examine how these ideas apply to a game of trust. We discuss whether the flexibility of the approach is a virtue or a vice.

Suggested Citation

  • Martin Dufwenberg & Werner Gueth, 2001. "The Psychological Game of Trust," Papers on Strategic Interaction 2004-19, Max Planck Institute of Economics, Strategic Interaction Group.
    • Handle: RePEc:esi:discus:2004-19
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    References listed on IDEAS

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