Variable Temptations and Black Mark Reputations

41 Pages Posted: 4 Oct 2010

See all articles by Christina Aperjis

Christina Aperjis

Hewlett-Packard Enterprise - Social Computing Lab

Yali Miao

Jane Street Capital

Richard J. Zeckhauser

Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: September 2010

Abstract

In a world of imperfect information, reputations often guide the sequential decisions to trust and to reward trust. We consider two-player situations where the players meet but once. One player - the truster - decides whether to trust, and the other player - the temptee - has a temptation to betray when trusted. The strength of the temptation to betray may vary from encounter to encounter, and is independently distributed over time and across temptees. We refer to a recorded betrayal as a black mark. We study how trusters and temptees interact in equilibrium when past influences current play only through its effect on certain summary statistics. We first focus on the case that players only condition on the number of black marks of a temptee and study the different equilibria that emerge, depending on whether the trusters, the temptees, or a social planner has the ability to specify the equilibrium. We then show that conditioning on the number of interactions as well as on the number of black marks does not prolong trust beyond black marks alone. Finally, we consider more general summary statistics of a temptee's past and identify conditions under which there exist equilibria where trust is possibly suspended only temporarily.

Suggested Citation

Aperjis, Christina and Miao, Yali and Zeckhauser, Richard J., Variable Temptations and Black Mark Reputations (September 2010). NBER Working Paper No. w16423. Available at SSRN: https://ssrn.com/abstract=1685728

Christina Aperjis (Contact Author)

Hewlett-Packard Enterprise - Social Computing Lab ( email )

1501 Page Mill Road
Palo Alto, CA 9434
United States

Yali Miao

Jane Street Capital ( email )

Roppongi 6-12-4, Minato-ku
Tokyo, 106-0032
Japan

Richard J. Zeckhauser

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States
617-495-1174 (Phone)
617-384-9340 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
617-495-1174 (Phone)
617-496-3783 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
9
Abstract Views
525
PlumX Metrics