A Game-Theoretic Framework of Trust

Abstract

The key argument of this article is that, in principle, orthodox economics--starting from the homo economicus assumption--may have a lot to offer to the multidisciplinary study of trust. To limit its scope to an area more manageable than economics at large, I explore what is probably the most powerful device of modern economics' theory development--namely, game theory. In a way, a game emerges as soon as parties with conflicting interests start to interact. In the interorganizational world, conflicting interests are the rule rather than the exception, implying that games of trust abound. Whether or not such games of trust are associated with trustworthy behavior depends upon the players' features and the game's rules. Industrial organization's cartel theory, which is rooted in game theory, is very informative about the way in which the rules of the game impact upon the emergence and sustainability of competitive vis-à-vis cooperative behavior, which closely resembles the debate about trust. That is, trust in game theory indicates the conditions under which trustworthy behavior can be expected. In addition to that, the players' characteristics are crucial. Although a game theory with trust is flourishing in the context of behavioral economics, one that deals with organizational rather than individual behavior is yet to be developed. In this context, the literature about game theory and trust may offer a source of inspiration, since here ample evidence has been collected as to the origins and consequences of trust heterogeneity.

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