Please use this identifier to cite or link to this item:
Güth, Werner
Year of Publication: 
Series/Report no.: 
SFB 373 Discussion Paper 1998,40
The evolution of trustworthiness as a major aspect of business ethics depends crucially on whether it can be signaled. If this is impossible, only opportunistic traders will survive. Whereas previous studies have analysed detection agencies (Güth and Kliemt, 1994 and 1998) or have substituted signaling by ex post-punishment, e.g. in the form of courts (Brennan, Güth, Kliemt, 1997a and b), we here introduce the institution of banks which can guarantee payment. It is shown that this can crowd in trustworthiness, i.e. trustworthy traders can survive in the evolutionary race. Compared to detection agencies the result may, however, be both, crowding out and crowding in of business ethics. The crucial feature is the bank's ability to discriminate between trustworthy and unreliable debtors which, in our model, is formally captured by the probability difference of accepting their respective credit applications.
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
257.48 kB

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.