Affiliation:
1. Duke University, 213 Social Sciences Building, Durham, NC 27708-0097.
2. Stanford University, 579 Serra Mall, Stanford, CA 94305-6072.
Abstract
We study trust, reciprocity, and favors in a repeated trust game with private information. In our main analysis, players are willing to exhibit trust and thereby facilitate cooperative gains only if such behavior is regarded as a favor that must be reciprocated, either immediately or in the future. The size of a favor owed may decline over time, following neutral periods. Indeed, a favor-exchange relationship with this feature improves on a simple favor-exchange relationship. In some settings, an infrequent and symmetric punishment sustains greater cooperation. A honeymoon period followed by favor-exchange or symmetric punishment can also offer scope for improvement. (JEL C73, D82, Z13)
Publisher
American Economic Association
Subject
General Economics, Econometrics and Finance
Cited by
39 articles.
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1. The decline of trust across the U.S. finance industry;Journal of Economic Behavior & Organization;2023-09
2. Trust and Reciprocity in Firms’ Capacity Sharing;Manufacturing & Service Operations Management;2023-07
3. Economic Theory: Economics, Methods and Methodology;Revue économique;2023-01-11
4. Making and Breaking Promises when their Costs Are Private Information;Journal of Institutional and Theoretical Economics;2023
5. Trust and monitoring;Journal of Banking & Finance;2022-10