Projects per year
Rabin's psychological game-theoretic model of ‘fairness’ has been the starting point for a literature about preferences for reciprocity. In this literature, reciprocity is modelled by defining an individual's ‘kindness’ or ‘unkindness’ in terms of the consequences of his actions for others, and assuming a motivation to reward (punish) other people's kindness (unkindness). Contrary to intuition, this form of reciprocity cannot explain mutually beneficial trust and trustworthiness in a simple Trust Game. We formalise and offer a diagnosis of this ‘Paradox of Trust’. We distinguish between two kinds of reciprocity. Rabin's concept of reciprocal kindness is a psychologically plausible motivation, and the paradox is an informative result about the implications of this motivation. However, trust is better understood in terms of reciprocal cooperation – the motivation to play one's part in mutually beneficial practices, conditional on others playing their parts. We show that a theory of reciprocal cooperation can avoid the paradox.
- Paradox of Trust
- Psychological game theory
- Mutual benefit
- School of Economics - Professor of Economics
- Centre for Behavioural and Experimental Social Science - Member
- Centre for Competition Policy - Member
- Behavioural Economics - Member
- Economic Theory - Member
Person: Research Group Member, Research Centre Member, Academic, Teaching & Research
- 1 Finished
Sugden, R., Isoni, A. & Zheng, J.
1/01/16 → 30/06/21