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Economics of Trust and Cooperation
ECON 111
Spring 2007 not offered

What motivates and sustains cooperative behavior? Standard economic theories predict that in many settings cooperation is rare because the extra benefit of cooperative behavior is smaller for each individual than it is for society as a whole. As a result, economists have argued that formal methods of enforcing cooperation, such as contracts, financial incentives and the law are necessary to promote cooperation when it is socially desirable. Despite the lack of formal enforcement mechanisms, we observe cooperation in many environments ranging from the sharing of food in hunter and gatherer societies to teamwork in modern corporations to programmers who contribute to open source software projects. Recent research suggests that trust may serve as an informal means of sustaining cooperation which works alongside more formal guarantees, or even in their absence. In fact, according to some estimates about 30 percent of all transactions in developed countries are non-market; the number of such informal transactions is even higher in developing countries. We will explore the sources of trust and trustworthiness in social networks and during one-time anonymous encounters. Using insights from economic theory and evidence from economic experiments this course will investigate the relationship between trust and cooperation. Many classroom experiments will be conducted to demonstrate key theoretical concepts and empirical regularities.

Essential Capabilities: Quantitative Reasoning, Writing
Credit: 1 Gen Ed Area Dept: SBS ECON
Course Format: SeminarGrading Mode: Student Option
Level: UGRD Prerequisites: None
Fulfills a Major Requirement for: None

Last Updated on JUN-04-2023
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