Adaptive Build-Up and Breakdown of Trust: An Agent-Based Computational Approach

CentER Discussion Paper No. 2005-39

29 Pages Posted: 21 Apr 2005

See all articles by Alexander Gorobets

Alexander Gorobets

Erasmus Research Institute of Management (ERIM)

Bart Nooteboom

Tilburg University - Tilburg University School of Economics and Management

Date Written: revised version April 2006

Abstract

This article employs Agent-Based Computational Economics (ACE) to investigate whether, and under what conditions, trust is viable in markets.The emergence and breakdown of trust is modeled in a context of multiple buyers and suppliers.Agents develop trust in a partner as a function of observed loyalty. They select partners on the basis of their trust in the partner and potential profit.On the basis of realized profits, they adapt the weight they attach to trust relative to profitability, and their own trustworthiness, modeled as a threshold of defection.Trust turns out to be viable under fairly general conditions.

Keywords: Agent-based computational economics, inter-firm alliances, learning, transaction costs, governance, trust, complex adaptive systems

JEL Classification: C63, D23, L14, L22, L24

Suggested Citation

Gorobets, Alexander and Nooteboom, Bart, Adaptive Build-Up and Breakdown of Trust: An Agent-Based Computational Approach (revised version April 2006). CentER Discussion Paper No. 2005-39, Available at SSRN: https://ssrn.com/abstract=706845 or http://dx.doi.org/10.2139/ssrn.706845

Alexander Gorobets (Contact Author)

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands
+31 10 408 1405 (Phone)
+31 10 408 9015 (Fax)

Bart Nooteboom

Tilburg University - Tilburg University School of Economics and Management ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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