CeDEx workshop - Silvia Sonderegger (University of Nottingham)

Trust, trustworthiness and the consensus effect; an evolutionary approach

Abstract:

It is well known that people form expectations about others using the lens of their own attitudes (the so-called consensus effect). We study the consensus effect and its implications for trust and trustworthiness. Since trustworthy individuals are more “optimistic” about people than opportunists, they are less afraid to engage in market-based exchanges, where they may be vulnerable to opportunistic behaviour. We use an indirect evolutionary approach to endogenize preferences for trustworthiness. In some cases, the material rewards from greater market participation may compensate for the material disadvantages from foregoing lucrative expropriation opportunities. Hence, a polymorphic equilibrium (where both trustworthiness and opportunism coexist in the population) may be evolutionarily stable. Stricter enforcement (that limits the scope for opportunism) may favour the spreading of trustworthiness (crowding in), but the opposite (crowding out) may also occur. Our analysis is consistent with experimental evidence.