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Social norms and trust among strangers


Social norms and trust among strangers

Xie, Huan and Lee, Yong-Ju (2012) Social norms and trust among strangers. Games and Economic Behavior, 76 (2). pp. 548-555. ISSN 08998256

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Official URL: http://dx.doi.org/10.1016/j.geb.2012.07.010


We study the development of a social norm of trust and reciprocity among a group of strangers via the “contagious strategy” as defined in Kandori (1992). Over an infinite horizon, the players anonymously and randomly meet each other and play a binary trust game. In order to provide the investors with proper incentives to follow the contagious strategy, there is a sufficient condition that requires that there exists an outside option for the investors. Moreover, the investorsʼ payoff from the outside option must converge to the payoff from trust and reciprocity as the group size goes to infinity. We show that this sufficient condition is also a necessary condition to sustain any sequential equilibrium in which the trustees adopt the contagious strategy. Our results imply that a contagious equilibrium only supports trust if trust contributes almost nothing to the investorsʼ payoffs.

Divisions:Concordia University > Faculty of Arts and Science > Economics
Item Type:Article
Authors:Xie, Huan and Lee, Yong-Ju
Journal or Publication:Games and Economic Behavior
Digital Object Identifier (DOI):10.1016/j.geb.2012.07.010
ID Code:975161
Deposited On:21 Jan 2013 21:01
Last Modified:18 Jan 2018 17:39
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