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Type | Working Paper |
Scope | Discipline-based scholarship |
Title | The complementarity between trust and contract enforcement |
Organization Unit | |
Authors |
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Language |
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Institution | University of Zurich |
Series Name | Working paper series / Department of Economics |
Number | 377 |
ISSN | 1664-705X |
Number of Pages | 59 |
Date | 2022 |
Abstract Text | We show experimentally and theoretically that trust and contract enforcement can be complements, and identify the key mechanisms that drive this complementarity. In our experiments, the effect of improvements in contract enforcement is trust-dependent, and the effect of increases in trust is shaped by the strength of contract enforcement. We identify three key mechanisms underlying this complementarity: (1) heterogeneity in trustworthiness; (2) strength of contract enforcement affecting the ability to elicit reciprocal behavior from trustworthy types, and screen out untrustworthy types; (3) trust beliefs determining willingness to try such strategies. |
Related URLs | |
Other Identification Number | merlin-id:20439 |
PDF File | Download from ZORA |
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Keywords | Trust, contract enforcement, complementarity, equilibrium selection, causal effect, screening, belief distortions, institutions |
Additional Information | Revised version; Former title: The complementary nature of trust and contract enforcement |