Trust, Introspection, and Market Participation: an Evolutionary Approach

Fabrizio Adriani and Silvia Sonderegger

MPRA Paper from University Library of Munich, Germany

Abstract: We build a model where introspection matters - i.e., people rationally form expectations about others using the lens of their own attitudes. Since trustworthy individuals are more "optimistic" about people than opportunists, they are less afraid to engage in market-based exchanges, where they may be vulnerable to opportunistic behavior. Within this context, we use an indirect evolutionary approach to endogenize preferences for trustworthiness. In some cases, the material rewards from greater market participation may outweigh the material disadvantages from foregoing lucrative expropriation opportunities. This implies that trustworthiness may be evolutionary stable in the long-term. Although stricter enforcement (that limits the scope for opportunistic behavior) does in some cases favor preferences for trustworthy behavior (crowding in) we show that the opposite (crowding out) may also occur. Our findings are consistent with recent empirical evidence.

Keywords: Endogenous Preferences; Trust; Introspection; Institutions; Enforcement; Crowding Out (search for similar items in EconPapers)
JEL-codes: C73 D02 D81 D82 Z13 (search for similar items in EconPapers)
Date: 2009-07
New Economics Papers: this item is included in nep-evo and nep-soc
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:16110

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