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Reciprocity and the paradox of trust in psychological game theory
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Isoni, Andrea and Sugden, Robert (2019) Reciprocity and the paradox of trust in psychological game theory. Journal of Economic Behavior and Organization, 167 . pp. 219-227. doi:10.1016/j.jebo.2018.04.015 ISSN 0167-2681.
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Official URL: https://doi.org/10.1016/j.jebo.2018.04.015
Abstract
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.
| Item Type: | Journal Article | ||||||||
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| Subjects: | H Social Sciences > HB Economic Theory | ||||||||
| Divisions: | Faculty of Social Sciences > Warwick Business School > Behavioural Science Faculty of Social Sciences > Warwick Business School |
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| Library of Congress Subject Headings (LCSH): | Game theory, Reciprocity (Psychology) | ||||||||
| Journal or Publication Title: | Journal of Economic Behavior and Organization | ||||||||
| Publisher: | Elsevier Science BV | ||||||||
| ISSN: | 0167-2681 | ||||||||
| Official Date: | November 2019 | ||||||||
| Dates: |
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| Volume: | 167 | ||||||||
| Page Range: | pp. 219-227 | ||||||||
| DOI: | 10.1016/j.jebo.2018.04.015 | ||||||||
| Status: | Peer Reviewed | ||||||||
| Publication Status: | Published | ||||||||
| Access rights to Published version: | Open Access (Creative Commons) | ||||||||
| Date of first compliant deposit: | 8 May 2018 | ||||||||
| Date of first compliant Open Access: | 16 November 2018 | ||||||||
| RIOXX Funder/Project Grant: |
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