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Title: Trust, Trustworthiness and the Consensus Effect: An Evolutionary Approach
Authors: Adriani, Fabrizio
Sonderegger, S.
First Published: 2-May-2015
Publisher: Elsevier
Citation: European Economic Review 77 (2015) 102–116
Abstract: People often form expectations about others using the lens of their own attitudes (the so-called consensus effect). We study the implications of this for trust and trustworthiness in an evolutionary model where social preferences are endogenous. Trustworthy individuals are more “optimistic” than opportunists and are accordingly less afraid to engage in market-based exchanges, where they may be vulnerable to cheating. Depending on the distribution of social preferences in the population, the material benefits from greater participation may compensate for the costs of being trustworthy. By providing an explicit account of how individuals form and revise their beliefs, we are able to show the existence of a polymorphic equilibrium where both trustworthiness and opportunism coexist in the population. We also analyze the effect of enforcement, distinguishing between its role as deterrence of future misbehavior and as retribution for past misbehavior. We show that enforcement aimed at deterring opportunistic behavior has ambiguous effects on social preferences. It may favor the spreading of trustworthiness (crowding in), but the opposite (crowding out) may also occur. By contrast, crowding out never occur when punishment is merely intended as retribution
DOI Link: 10.1016/j.euroecorev.2015.04.003
ISSN: 0014-2921
Embargo on file until: 2-May-2017
Version: Post-print
Status: Peer-reviewed
Type: Journal Article
Description: Jel Codes: A13, C73, D02, D03, D82, Z1.
Appears in Collections:Published Articles, Dept. of Economics

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