All occurrences of this event have passed.
This listing is displayed for historical purposes.

Economic Theory: Community Enforcement of Trust with Bounded Memory

Caroline Thomas, University of Texas

Economics Economics
Abstract

We examine how trust is sustained in large societies with random matching, when records of past transgressions are retained for a finite length of time. To incentivise trustworthiness, defaulters should be punished by temporary exclusion. However, it is profitable to trust defaulters who are on the verge of rehabilitation. With perfect bounded information, defaulter exclusion unravels and trust cannot be sustained, in any purifiable equilibrium. A coarse information structure, that pools recent defaulters with those nearing rehabilitation, endogenously generates adverse selection, sustaining punishments. Equilibria where defaulters are trusted with positive probability improve efficiency, by raising the proportion of likely re-offenders in the pool of defaulters.

Joint with V. Bhaskar
Report Event As Inappropriate Contact Event Organizers

When and Where

Map Lorch Hall - 201

April 2019

10:00am - 11:30am

Explore Similar Events

  •  Loading Similar Events...