Trust and Arena Size. Expectations, Trust, and Institutions Co-Evolving, and Their Critical Population and Group Sizes

Wolfram Elsner and Henning Schwardt

MPRA Paper from University Library of Munich, Germany

Abstract: We develop a formal approach to the emergence of institutionalized trust in the context of the evolution of cooperation, with a particular focus on the relevance of the size dimension of this process. While trust in general has been widely investigated, as has the size dimension of structural emergence, both have rarely been analyzed together in an integrated approach to the co-evolution of institutions, trust, and the size of their populations and carrier groups. This then also helps explaining general(ized) trust. In a game-theoretic set-up, we determine critical levels of expectations as a factor facilitating the emergence of institutionalized cooperation in an arena, or population. Critical levels of expectations (to meet a cooperative agent) and arena size turn out to be interdependent. A carrier group, or platform, emerges under further conditions. It encompasses only a part of the larger population, indicating a maximum critical mass of cooperators (a meso-size) that can be sustained in a population, under an additional set of agency capabilities, particularly partner selection. Once cooperation has been established as the prevalent behavioral pattern in a number of platforms, its habituation as an institution may lead to a contingent perception of trustworthiness of agents. Habituated cooperation, its generalization, spillover or transfer across platforms, in combination with the perceived trustworthiness of others may lead to an increasing general trust level in the larger population. The approach chosen thus allows identifying critical factors of general trust among strangers in a larger population even in one-shot interactions. The significant differences observed in actual general-trust levels among countries, highly correlated with their macro performances, can be explained from the countries’ different (and mainly ‘inner’) size conditions in the deep structures of their interaction arenas and resulting platforms (rather than just total population size), contributing to the persistent varieties of capitalism.

Keywords: cooperation; group size; habituation; trust (search for similar items in EconPapers)
JEL-codes: B52 C73 D83 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-evo and nep-soc
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