On the Reliability of Trusting

Harvey James

Microeconomics from University Library of Munich, Germany

Abstract: This paper presents a model of trust in which a principal chooses either to trust or monitor an agent who, in turn, chooses either to honor or exploit that trust. The principal's decision of whether to trust or monitor is based on the relative temptation an agent faces to exploit the principal's trust, which comprises two elements – the environmental incentives the agent faces and the personal characteristics of the agent. The model is used to develop a reliability condition that the principal uses to assess the likelihood that trust placed in an agent will be honored.

Keywords: trust; trustworthiness; principal-agent relationship; moral hazard; transaction costs; monitoring (search for similar items in EconPapers)
JEL-codes: D23 D64 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2002-02-04
New Economics Papers: this item is included in nep-hpe and nep-pke
Note: Type of Document - Microsoft Word; prepared on IBM PC; to print on HP; pages: 35; figures: 4. Figures embedded as metafiles in document
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Journal Article: On the Reliability of Trusting (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpmi:0202002

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