Building trust: The costs and benefits of gradualism

Kartal, Melis and Müller, Wieland and Tremewan, James (2021) Building trust: The costs and benefits of gradualism. Games and Economic Behavior, 130. pp. 258-275. ISSN 0899-8256

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Abstract

We examine the prevalence of gradualist strategies and their effect on trust-building and economic gains in a setting with an infinite horizon, asymmetric information regarding the trustworthiness of receivers, and various levels of trust. The theoretical literature suggests that gradualist strategies mitigate asymmetric information problems and foster trust-building. However, we theoretically and experimentally show that gradualism sometimes reduces joint payoffs relative to a simple “binary” setting in which trust is an all-or-nothing decision. In a series of experiments, we vary the degree of asymmetric information as well as the economic returns to trusting behavior, and delineate circumstances under which gradualism may promote or curb efficiency.

Item Type: Article
Keywords: Cooperation, Trust, Infinitely repeated games, Gradualism, Game theory, Experiments
Classification Codes: JEL C73, C91, C92, D82, D83
Divisions: Departments > Volkswirtschaft > Kartal
Version of the Document: Published
Depositing User: Melis Kartal
Date Deposited: 17 Sep 2021 11:25
Last Modified: 17 Sep 2021 11:25
FIDES Link: https://bach.wu.ac.at/d/research/results/101369/
URI: https://epub.wu.ac.at/id/eprint/8290

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