Hostage Posting as a Mechanism of Trust: Binding, Compensation, and Signaling

@article{citeulike:2144456, abstract = {We study voluntary hostage posting - pledging a bond - as a commitment mechanism promoting trust, including trust in economic exchange. A hostage can promote trust by binding the trustee through reducing his incentives for abusing trust, by providing compensation for the trustor in case trust is abused, and by serving as a signal for the trustor about unobservable characteristics of the trustee that are related to the trustee's opportunities and incentives for abusing trust. We provide an integrated model that allows for a simultaneous analysis of how hostages promote trust through binding, compensation, and signaling. We model hostage posting as a mechanism of trust using a game with incomplete information and uncertainty. Our theorems provide conditions for equilibria such that a hostage is posted by the trustee and induces the trustor to place trust that is subsequently honored by the trustee. The article shows that equilibrium selection problems are not severe: the equilibria are unique or there are only few other equilibria with less appealing properties. Hence, the results can be used for predictions on trust based on hostage posting among rational actors. 10.1177/1043463104044682}, author = {Raub, Werner }, citeulike-article-id = {2144456}, doi = {10.1177/1043463104044682}, journal = {Rationality and Society}, keywords = {trust}, month = {August}, number = {3}, pages = {319--365}, posted-at = {2007-12-19 06:59:03}, priority = {4}, title = {Hostage Posting as a Mechanism of Trust: Binding, Compensation, and Signaling}, url = {http://dx.doi.org/10.1177/1043463104044682}, volume = {16}, year = {2004} }

TY - JOUR ID - citeulike:2144456 L3 - citeulike-article-id:2144456 TI - Hostage Posting as a Mechanism of Trust: Binding, Compensation, and Signaling JF - Rationality and Society VL - 16 IS - 3 SP - 319 EP - 365 N2 - We study voluntary hostage posting - pledging a bond - as a commitment mechanism promoting trust, including trust in economic exchange. A hostage can promote trust by binding the trustee through reducing his incentives for abusing trust, by providing compensation for the trustor in case trust is abused, and by serving as a signal for the trustor about unobservable characteristics of the trustee that are related to the trustee's opportunities and incentives for abusing trust. We provide an integrated model that allows for a simultaneous analysis of how hostages promote trust through binding, compensation, and signaling. We model hostage posting as a mechanism of trust using a game with incomplete information and uncertainty. Our theorems provide conditions for equilibria such that a hostage is posted by the trustee and induces the trustor to place trust that is subsequently honored by the trustee. The article shows that equilibrium selection problems are not severe: the equilibria are unique or there are only few other equilibria with less appealing properties. Hence, the results can be used for predictions on trust based on hostage posting among rational actors. 10.1177/1043463104044682 KW - trust AU - Raub, Werner PY - 2004/08/01/ UR - http://dx.doi.org/10.1177/1043463104044682 ER -