Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/100146
Authors: 
Adriani, Fabrizio
Sonderegger, Silvia
Year of Publication: 
2013
Series/Report no.: 
CeDEx Discussion Paper Series 2013-09
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. Trustworthy individuals are more \optimistic" than opportunists and are accordingly less afraid to engage in market-based exchanges, where they may be vulnerable to opportunistic behavior. In some cases, the material benefits from greater market participation may compensate for the costs of being trustworthy. We use an indirect evolutionary approach to endogenize preferences for trustworthiness, showing that a polymorphic equilibrium (where both trustworthiness and opportunism coexist in the population) may be evolutionarily stable. Better institutions limiting the scope for opportunism may favor the spreading of trustworthiness (crowding in), but the opposite (crowding out) may also occur. Our analysis is consistent with experimental evidence.
Subjects: 
Endogenous Preferences
Trust
Consensus Effect
Institutions
Crowding Out
JEL: 
C73
D02
D03
D82
Z1
Document Type: 
Working Paper

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