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Adaptive Build-up and Breakdown of Trust: An Agent Based Computational Approach

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  • Alexander Gorobets
  • Bart Nooteboom

Abstract

This article employs Agent-Based Computational Economics (ACE) to investigate whether, and under what conditions, trust is viable in markets. The emergence and breakdown of trust is modeled in a context of multiple buyers and suppliers. Agents develop trust in a partner as a function of observed loyalty. They select partners on the basis of their trust in the partner and potential profit, with adaptive weights. On the basis of realized profits, they adapt the weight they attach to trust relative to profitability, and their own trustworthiness, modeled as a threshold of defection. Trust and loyalty turn out to be viable under fairly general conditions. Copyright Springer 2006

Suggested Citation

  • Alexander Gorobets & Bart Nooteboom, 2006. "Adaptive Build-up and Breakdown of Trust: An Agent Based Computational Approach," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 10(3), pages 277-306, September.
    • Handle: RePEc:kap:jmgtgv:v:10:y:2006:i:3:p:277-306
    DOI: 10.1007/s10997-006-9001-6
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    Cited by:

    1. Nooteboom, B., 2006. "Human Nature in the Adaptation of Trust," Discussion Paper 2006-37, Tilburg University, Center for Economic Research.
    2. Nooteboom, B., 2006. "Human Nature in the Adaptation of Trust," Other publications TiSEM 6a7897e0-90c6-4c0f-88ed-2, Tilburg University, School of Economics and Management.

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    More about this item

    Keywords

    agent-based computational economics; complex adaptive systems; governance; inter-firm relations; transaction costs; trust; C63; L14; L22; L24; P13;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • P13 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Cooperative Enterprises

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