Emergence of Impersonal Exchange

30 Pages Posted: 19 Sep 2017 Last revised: 28 Aug 2018

See all articles by Prateek Raj

Prateek Raj

University College London - School of Management; Indian Institute of Management (IIMB), Bangalore; University of Chicago - George J. Stigler Center for the Study of the Economy and the State

Date Written: August 25, 2018


I study the trade-off between relational and impersonal exchanges. I model an economy where trade with strangers is voluntary, anonymous, one-shot, and self-interested. The conduct of traders is determined by the routines they follow, that evolutionarily compete and are sticky. I find that reliable impersonal exchange can emerge if 1) there is a high benefit from engaging with strangers (utility condition), and 2) a threshold adoption of standardized routines that reduced partiality in conduct (formalization condition). If the above conditions hold, impersonal exchanges supported by co-evolving generalized institutions can emerge. Cycles, where cheating and cautious relational exchange follows reliable impersonal exchange, can sustain impersonal exchanges.

Keywords: trust, routines, formalization, punctuated equilibrium, institutions, evolution, Europe

JEL Classification: A13, A14, C73, N93, Z13

Suggested Citation

Raj, Prateek, Emergence of Impersonal Exchange (August 25, 2018). Available at SSRN: https://ssrn.com/abstract=3033861 or http://dx.doi.org/10.2139/ssrn.3033861

Prateek Raj (Contact Author)

University College London - School of Management ( email )

Gower Street
London, WC1E 6BT
United Kingdom

Indian Institute of Management (IIMB), Bangalore ( email )

Bannerghatta Road
Bangalore, Karnataka 560076
+918026993123 (Phone)

HOME PAGE: http://www.iimb.ac.in/profile/77

University of Chicago - George J. Stigler Center for the Study of the Economy and the State ( email )

Walker Hall
Chicago, IL 60637
United States

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