Trust and Trustworthiness in an Economy with Heterogeneous Individuals

CERGE-EI Working Paper No. 305

58 Pages Posted: 18 Jan 2005

See all articles by Peter Katuscak

Peter Katuscak

RWTH Aachen University - Chair for Economics (Microeconomics)

Joel B. Slemrod

University of Michigan, Stephen M. Ross School of Business; National Bureau of Economic Research (NBER)

Date Written: September 2006

Abstract

We analyze the determinants of trust and trustworthiness in a matching equilibrium when agents have heterogeneous predispositions towards trusting and trustworthy behavior, there is transmission of information via both individual and collective reputations, and successful matches may persist. In new matches, more trustworthiness breeds more trust. However, whether more trust breeds more or less trustworthiness depends on the observability of individual histories of play. If it is low, more trust generally breeds less trustworthiness, while if it is high, more trust breeds more trustworthiness. We combine the links between trust and trustworthiness to construct a general trust/trustworthiness equilibrium and discuss its properties.

Keywords: Trust, trustworthiness, reputation

Suggested Citation

Katuscak, Peter and Slemrod, Joel B., Trust and Trustworthiness in an Economy with Heterogeneous Individuals (September 2006). CERGE-EI Working Paper No. 305. Available at SSRN: https://ssrn.com/abstract=649853 or http://dx.doi.org/10.2139/ssrn.649853

Peter Katuscak (Contact Author)

RWTH Aachen University - Chair for Economics (Microeconomics) ( email )

Aachen, 52056
Germany

Joel B. Slemrod

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Room R5396
Ann Arbor, MI 48109-1234
United States
734-936-3914 (Phone)
734-763-4032 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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