nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2006‒12‒09
three papers chosen by
Matthew Baker
US Naval Academy, USA

  1. Trust and Trustworthiness in an Economy with Heterogeneous Individuals By Peter Katuscak; Joel Slemrod
  2. Efficiency, communication and honesty By Demichelis, Stefano; Weibull, Jörgen
  3. A Rational Irrational Man? By Alexander Harin

  1. By: Peter Katuscak; Joel Slemrod
    Abstract: We analyze the determinants of trust and trustworthiness in a matching equilibrium when agents have heterogeneous predispositions towards trusting and trustworthy behavior, there is transmission of information via both individual and collective reputations, and successful matches may persist. In new matches, more social trustworthiness breeds more individual trust. However, whether more social trust breeds more or less individual trustworthiness depends on the observability of individual histories of play. If it is low, more trust generally breeds less trustworthiness, while if it is high, more trust breeds more trustworthiness. We combine the links between social trust and trustworthiness to construct a general trust/trustworthiness equilibrium and discuss its properties.
    Keywords: Trust, trustworthiness, reputation.
    JEL: C7
    Date: 2006–09
  2. By: Demichelis, Stefano (Università degli studi di Pavia); Weibull, Jörgen (Dept. of Economics, Stockholm School of Economics)
    Abstract: We here develop a model of pre-play communication that generalizes the cheap-talk approach by allowing players to have a lexicographic preference, second to the payoffs in the underlying game, for honesty. We formalize this by way of an honesty (or truth) correspondence between actions and statements, and postulate two axioms met by natural languages. The model is applied to finite and symmetric two-player games and we establish that honest communication and play of the Pareto dominant Nash equilibrium together characterize the unique evolutionarily stable set in generic and symmetric n×n-coordination games. In particular, this holds even in Aumann's (1990) example of a Pareto dominant equilibrium that is not self-enforcing.
    Keywords: efficiency; communication; coordination; honesty; evolutionary stability
    JEL: C72 C73 D01
    Date: 2006–02–01
  3. By: Alexander Harin (Modern University for the Humanities)
    Abstract: A man is a key subject of economics. “A man is irrational” - this opinion can be made from Allais paradox, risk aversion and other well-known fundamental problems. For a long time, this opinion was a barrier to proper solution of these problems and the development of the economics. A radically new way is proposed to solve them and remove this barrier. The way is the generalization of a breach of a term of contract.
    Keywords: risk, business, bank, trade, industry, development, utility, contract, “ideal” economics, investment
    JEL: C D E C7 D8 E2 G11
    Date: 2006–08–14

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