 Reciprocity and the Paradox of Trust in psychological game theoryAndrea Isoni and Robert Sugden Journal of Economic Behavior & Organization, 2019, vol. 167, issue C, 219-227 Abstract: Rabin's psychological game-theoretic model of ‘fairness’ has been the starting point for a literature about preferences for reciprocity. In this literature, reciprocity is modelled by defining an individual's ‘kindness’ or ‘unkindness’ in terms of the consequences of his actions for others, and assuming a motivation to reward (punish) other people's kindness (unkindness). Contrary to intuition, this form of reciprocity cannot explain mutually beneficial trust and trustworthiness in a simple Trust Game. We formalise and offer a diagnosis of this ‘Paradox of Trust’. We distinguish between two kinds of reciprocity. Rabin's concept of reciprocal kindness is a psychologically plausible motivation, and the paradox is an informative result about the implications of this motivation. However, trust is better understood in terms of reciprocal cooperation – the motivation to play one's part in mutually beneficial practices, conditional on others playing their parts. We show that a theory of reciprocal cooperation can avoid the paradox. Keywords: Reciprocity; Paradox of Trust; Kindness; Cooperation; Psychological game theory; Mutual benefit (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:167:y:2019:i:c:p:219-227 DOI: 10.1016/j.jebo.2018.04.015 Access Statistics for this article Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D. More articles in Journal of Economic Behavior & Organization from Elsevier |
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