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Trust and Trustworthiness in an Economy with Heterogeneous Individuals

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  • 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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    References listed on IDEAS

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    More about this item

    Keywords

    Trust; trustworthiness; reputation.;
    All these keywords.

    JEL classification:

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

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