Trust and Social Control: Sources of Cooperation, Performance, and Stability in Informal Value Transfer Systems

Claudius Gräbner-Radkowitsch, Wolfram Elsner and Alex Lascaux
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Alex Lascaux: Russian Presidential Academy of National Economy

Computational Economics, 2021, vol. 58, issue 4, No 6, 1077-1102

Abstract: Abstract We study the functioning of informal value transfer systems through the example of Hawala. By complementing the institutional theory with computational experiments that use the first agent-based model of IVTS, we examine the roles of generalized trust and social control for the emergence, stability, and efficiency of Hawala. We show that both trust and control are necessary, but not sufficient to guarantee its functioning, and that their relationship is time-dependent. The success of Hawala also depends on population size, interaction density, and forgiveness of the agents. Finally, we provide a theoretically grounded operationalization of generalized trust and social control that is applicable to informal exchange systems in general.

Keywords: Agent-based modelling; Game theory; Hawala; Institutions; Social control; Trust; Value transfer systems (search for similar items in EconPapers)
JEL-codes: C63 C7 D83 G29 O17 (search for similar items in EconPapers)
Date: 2021
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Working Paper: Trust and Social Control. Sources of cooperation, performance, and stability in informal value transfer systems (2017)
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DOI: 10.1007/s10614-020-09994-0

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