Building trust: The costs and benefits of gradualism

Melis Kartal, Wieland Müller and James Tremewan

Games and Economic Behavior, 2021, vol. 130, issue C, 258-275

Abstract: We examine the prevalence of gradualist strategies and their effect on trust-building and economic gains in a setting with an infinite horizon, asymmetric information regarding the trustworthiness of receivers, and various levels of trust. The theoretical literature suggests that gradualist strategies mitigate asymmetric information problems and foster trust-building. However, we theoretically and experimentally show that gradualism sometimes reduces joint payoffs relative to a simple “binary” setting in which trust is an all-or-nothing decision. In a series of experiments, we vary the degree of asymmetric information as well as the economic returns to trusting behavior, and delineate circumstances under which gradualism may promote or curb efficiency.

Keywords: Cooperation; Trust; Infinitely repeated games; Gradualism; Game theory; Experiments (search for similar items in EconPapers)
JEL-codes: C73 C91 C92 D82 D83 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:130:y:2021:i:c:p:258-275

DOI: 10.1016/j.geb.2021.07.008

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