Trust and Trustworthiness in an Economy with Heterogeneous Individuals

Peter Katuscak () and Joel Slemrod

CERGE-EI Working Papers from The Center for Economic Research and Graduate Education - Economics Institute, Prague

Abstract: We analyze the determinants of trust and trustworthiness in a matching equilibrium when agents have heterogeneous predispositions towards trusting and trustworthy behavior, there is transmission of information via both individual and collective reputations, and successful matches may persist. In new matches, more social trustworthiness breeds more individual trust. However, whether more social trust breeds more or less individual trustworthiness depends on the observability of individual histories of play. If it is low, more trust generally breeds less trustworthiness, while if it is high, more trust breeds more trustworthiness. We combine the links between social trust and trustworthiness to construct a general trust/trustworthiness equilibrium and discuss its properties.

Keywords: Trust; trustworthiness; reputation. (search for similar items in EconPapers)
JEL-codes: C7 (search for similar items in EconPapers)
Date: 2006-09
New Economics Papers: this item is included in nep-cbe, nep-evo, nep-pol and nep-soc
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