Trust, Reputation, And Exit in Exchange Relationships

Bernd Lahno

Journal of Conflict Resolution, 1995, vol. 39, issue 3, 495-510

Abstract: Contrary to the assumptions of the supergame model, agents in exchange situations will normally not be perfectly informed about past behavior of their partners. Moreover, they will generally be in a position to choose their partners. The formal model of this article attempts to take account of these facts. It is presupposed that, for any actor, the probability of finding a partner for an advantageous exchange depends on his or her past behavior. A model of reputation formation is presented as a formal description of this dependency. On the basis of this model, it is shown that, under certain conditions, only cooperative conduct will pay in the long run. Thus it is confirmed that, given a suitable mechanism of trust, rational agents may act trustworthy.

Date: 1995
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Persistent link: https://EconPapers.repec.org/RePEc:sae:jocore:v:39:y:1995:i:3:p:495-510

DOI: 10.1177/0022002795039003005

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