Publication Date:
2013-05-01
Description:
We study trust, reciprocity, and favors in a repeated trust game with private information. In our main analysis, players are willing to exhibit trust and thereby facilitate cooperative gains only if such behavior is regarded as a favor that must be reciprocated, either immediately or in the future. The size of a favor owed may decline over time, following neutral periods. Indeed, a favor-exchange relationship with this feature improves on a simple favor-exchange relationship. In some settings, an infrequent and symmetric punishment sustains greater cooperation. A honeymoon period followed by favor-exchange or symmetric punishment can also offer scope for improvement. (JEL C73, D82, Z13)
Print ISSN:
1945-7669
Electronic ISSN:
1945-7685
Topics:
Economics
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