Expectations of Fairness and Trust Co-Evolve in Environments of Partial Information

Paul Rauwolf () and Joanna J. Bryson
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Paul Rauwolf: Bangor University
Joanna J. Bryson: University of Bath

Dynamic Games and Applications, 2018, vol. 8, issue 4, No 11, 917 pages

Abstract: Abstract When playing one-shot economic games, individuals often blindly trust others, accepting partnerships without any information regarding the trustworthiness of their partner. Consequently, they risk deleterious pacts. Oddly, when individuals do have information about another, they reject partnerships that are not fair, despite the fact that such offers are profitable—individuals costly punish. Why would one reject profitable partnerships on the one hand, but risk unknown offers on the other? Significant research has gone into explaining the contexts where blind trust or costly punishment provides an evolutionary advantage; however, both behaviours are rarely considered in tandem. Here we demonstrate that both behaviours can simultaneously be revenue maximizing. Further, given the plausible condition of partially obscured information and partner choice, trust mediates the generation of costly punishment. This result is important because it demonstrates that the evolutionary viability of trust, fairness, and costly punishment may be linked. The adaptive nature of fairness expectations can best be explained in concert with trust.

Keywords: Trust; Partial information; Costly punishment; Fairness; Trust game; Negative pseudo-reciprocity (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1007/s13235-017-0230-x

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