IDEAS home Printed from https://ideas.repec.org/p/zbw/sfb373/199840.html
   My bibliography  Save this paper

Do banks crowd in or out business ethics? An indirect evolutionary analysis

Author

Listed:
  • Güth, Werner

Abstract

The evolution of trustworthiness as a major aspect of business ethics depends crucially on whether it can be signaled. If this is impossible, only opportunistic traders will survive. Whereas previous studies have analysed detection agencies (Güth and Kliemt, 1994 and 1998) or have substituted signaling by ex post-punishment, e.g. in the form of courts (Brennan, Güth, Kliemt, 1997a and b), we here introduce the institution of banks which can guarantee payment. It is shown that this can crowd in trustworthiness, i.e. trustworthy traders can survive in the evolutionary race. Compared to detection agencies the result may, however, be both, crowding out and crowding in of business ethics. The crucial feature is the bank's ability to discriminate between trustworthy and unreliable debtors which, in our model, is formally captured by the probability difference of accepting their respective credit applications.

Suggested Citation

  • Güth, Werner, 1998. "Do banks crowd in or out business ethics? An indirect evolutionary analysis," SFB 373 Discussion Papers 1998,40, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    • Handle: RePEc:zbw:sfb373:199840
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/61230/1/721975054.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384, December.
    2. Güth, W. & Kliemt, H., 1993. "Competition or Co-Operation," Discussion Paper 1993-39, Tilburg University, Center for Economic Research.
    3. Guth, Werner & Peleg, Bezalel, 1996. "On ring formation in auctions," Mathematical Social Sciences, Elsevier, vol. 32(1), pages 1-37, August.
    4. Selten, Reinhard, 1983. "Evolutionary stability in extensive two-person games," Mathematical Social Sciences, Elsevier, vol. 5(3), pages 269-363, September.
    5. Hammerstein, Peter & Selten, Reinhard, 1994. "Game theory and evolutionary biology," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 2, chapter 28, pages 929-993, Elsevier.
    6. Brennan, Geoffrey & Güth, Werner & Kliemt, Hartmut, 1997. "Trust in the shadow of the courts if judges are no better," SFB 373 Discussion Papers 1997,44, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Weibull, Jörgen W., 1997. "What have we learned from Evolutionary Game Theory so far?," Working Paper Series 487, Research Institute of Industrial Economics, revised 26 Oct 1998.
    2. Güth, Werner, 1998. "Sequential versus independent commitment: An indirect evolutionary analysis of bargaining rules," SFB 373 Discussion Papers 1998,5, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    3. Maria Vittoria Levati, "undated". "Explaining Private Provision of Public Goods by Conditional Cooperation - An Evoltuionary Approach -," Papers on Strategic Interaction 2002-44, Max Planck Institute of Economics, Strategic Interaction Group.
    4. Dufwenberg, Martin & Güth, Werner, 1997. "Indirect evolution versus strategic delegation: A comparison of two approaches to explaining economic institutions," SFB 373 Discussion Papers 1997,28, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    5. Werner Güth & Hartmut Kliemt, 1998. "The Indirect Evolutionary Approach:," Rationality and Society, , vol. 10(3), pages 377-399, August.
    6. Werner Gueth & Axel Ockenfels, 2000. "Evolutionary Norm Enforcement," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 156(2), pages 335-335, June.
    7. Güth, Werner & Kliemt, Hartmut, 2001. "Langzeiteffekte der Theory of Games and Economic Behavior: Zur Anwendung der Spieltheorie in den (Sozial-)wissenschaften," SFB 373 Discussion Papers 2001,8, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    8. Guth, Werner, 2001. "Do banks crowd in business ethics? An indirect evolutionary analysis," International Review of Economics & Finance, Elsevier, vol. 10(1), pages 1-17.
    9. Güth, Werner & Ockenfels, Axel, 2005. "The coevolution of morality and legal institutions: an indirect evolutionary approach," Journal of Institutional Economics, Cambridge University Press, vol. 1(2), pages 155-174, December.
    10. Barbara Dluhosch, 2011. "European Economics at a Crossroads, by J. Barkley Rosser, Jr., Richard P. F. Holt, and David Colander," Journal of Regional Science, Wiley Blackwell, vol. 51(3), pages 629-631, August.
    11. Martin Dufwenberg & Werner Guth, 2003. "Indirect Evolution Versus Strategic Delegation," Levine's Working Paper Archive 618897000000000789, David K. Levine.
    12. Van Cleve, Jeremy, 2015. "Social evolution and genetic interactions in the short and long term," Theoretical Population Biology, Elsevier, vol. 103(C), pages 2-26.
    13. Anders Poulsen & Gert Svendsen, 2005. "Social Capital and Endogenous Preferences," Public Choice, Springer, vol. 123(1), pages 171-196, April.
    14. J. Barkley Rosser Jr & Richard P.F. Holt & David Colander, 2010. "European Economics at a Crossroads," Books, Edward Elgar Publishing, number 13585.
    15. Heller, Yuval & Kuzmics, Christoph, 2020. "Communication, Renegotiation and Coordination with Private Values (Extended Version)," MPRA Paper 102926, University Library of Munich, Germany, revised 26 Jul 2021.
    16. van Damme, Eric & Hurkens, Sjaak, 1999. "Endogenous Stackelberg Leadership," Games and Economic Behavior, Elsevier, vol. 28(1), pages 105-129, July.
    17. Dennis L. Gärtner, 2022. "Corporate Leniency in a Dynamic World: The Preemptive Push of an Uncertain Future," Journal of Industrial Economics, Wiley Blackwell, vol. 70(1), pages 119-146, March.
    18. Paul Pezanis-Christou & Abdolkarim Sadrieh, 2003. "Elicited bid functions in (a)symmetric first-price auctions," Working Papers 85, Barcelona School of Economics.
    19. Maarten C.W. Janssen, 1997. "Focal Points," Tinbergen Institute Discussion Papers 97-091/1, Tinbergen Institute.
    20. Michael Kosfeld, 2002. "Stochastic strategy adjustment in coordination games," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 20(2), pages 321-339.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:sfb373:199840. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/sfhubde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.