The Psychological Game of Trust

Martin Dufwenberg and Werner Gueth ()
Authors registered in the RePEc Author Service: Werner Güth ()

Papers on Strategic Interaction from Max Planck Institute of Economics, Strategic Interaction Group

Abstract: Two traditional assumptions in neo-classical economics have been material self-interest and (commonly known) decision rationality. Since there is ample contradictory empirical evidence, many recent attempts have been made to remodel the situation so that rational behavior is more in line with actual results (game fitting). Here we concentrate on intrinsic let-down aversion whose strength can depend on the relative frequency of such concerns, i.e. on a sociological aspect, and examine how these ideas apply to a game of trust. We discuss whether the flexibility of the approach is a virtue or a vice.

Pages: 17 pages
Date: 2001-03
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