Building Trust

Saikat Datta

STICERD - Theoretical Economics Paper Series from Suntory and Toyota International Centres for Economics and Related Disciplines, LSE

Abstract: In this paper we show slow trust building in social relationships in a model of complete information. This model is in contrast to the asymmetric information settings in 'reputation' models of slow trust building. We look at a society of borrowers and lenders who interact over time; a borrower has a short term incentive to cheat (run away with the money). In a symmetric social equilibrium which is maximal in terms of payoff for the lender side of the population, we show that average trust builds up slowly and is non-decreasing.

Date: 1996-01
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Persistent link: https://EconPapers.repec.org/RePEc:cep:stitep:/1996/305

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