Market, trust, and inequality: An agent-based model of effect of market attractiveness on trusting behavior and inequality

Authored by Y Sato

Date Published: 2005

Sponsors: No sponsors listed

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Model Documentation: Other Narrative Flow charts Mathematical description

Model Code URLs: Model code not found

Abstract

It is empirically verified that people with higher income are, on an average, more trustful than those with lower income. If this finding is unconditionally valid, a dismal society may emerge and lead to the rich becoming richer by trusting strangers and receiving higher payoffs. The purpose of this paper is to explore the conditions that facilitate or hinder the growth of a dismal society by developing an agent-based model. We examined the hypothesis that the attractiveness of the market facilitates the trusting behavior of the rich, which results in a wider gap of the accumulated payoffs between the rich and the poor. In the model, agents decide whether or not they should leave their assurance group in order to receive a higher payoff from a stranger in the market. If an agent's partner is trustworthy, the agent receives a higher payoff from the partner than from a member in his/her assurance group. However, if the partner is not trustworthy, the agent receives a lower payoff. After receiving payoffs, agents learn to modify their behavior. The result of the simulation reveals that the gap between the rich and the poor widens only in the case of a moderately attractive market.

Tags

Agent-based model Social Capital Trust Inequality assurance