Trust and betrayals: reputational payoffs and behaviors without commitment

DOI10.3982/TE4182MaRDI QIDQ5164463zbMATH OpenOpenAlexFDO

Authors Harry Di Pei

Publication date 11 November 2021

Published in Theoretical Economics (Search for Journal in Brave)

Copyright license Creative Commons Attribution-NonCommercial 4.0 International

Full work available at URL https://arxiv.org/abs/2006.08071

zbMATH Keywords

equilibrium behaviorequilibrium payoffno commitment typereputation

Mathematics Subject Classification ID

Multistage and repeated games (91A20) Hierarchical games (including Stackelberg games) (91A65)

Abstract: I study a repeated game in which a patient player (e.g., a seller) wants to win the trust of some myopic opponents (e.g., buyers) but can strictly benefit from betraying them. Her benefit from betrayal is strictly positive and is her persistent private information. I characterize every type of patient player's highest equilibrium payoff. Her persistent private information affects this payoff only through the lowest benefit in the support of her opponents' prior belief. I also show that in every equilibrium which is optimal for the patient player, her on-path behavior is nonstationary, and her long-run action frequencies are pinned down for all except two types. Conceptually, my payoff-type approach incorporates a realistic concern that no type of reputation-building player is immune to reneging temptations. Compared to commitment-type models, the incentive constraints for all types of patient player lead to a sharp characterization of her highest attainable payoff and novel predictions on her behaviors.

Recommendations

• Maintaining a Reputation Against a Long-Lived Opponent
• Reputation and Experimentation in Repeated Games With Two Long-Run Players
• Reputation and Commitment in Two-Person Repeated Games Without Discounting
• Equilibrium behaviors in repeated games
• Reputation without commitment in finitely repeated games

Cited in

(8)

• Intermediaries in trust: indirect reciprocity, incentives, and norms
• Trust and reciprocity behavior and behavioral forecasts: Individuals versus group-representatives
• Third party assessments in trust problems with conflict of interest: an experiment on the effects of promises
• Starting small in project choice: a discrete-time setting with a continuum of types
• A reputation for honesty
• Only time will tell: credible dynamic signaling
• Repeated communication with private lying costs
• Public trust and government betrayal

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