CiteSeerX — Contracting with uncertain level of trust


	
  	




  
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    Contracting with uncertain level of trust  (2002) 

    
      
        
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        by 
        
          
            
            
              Sviatoslav Braynov
            
            
          
        
      

      
        	Venue:	Computational Intelligence
	Citations:	16 - 1 self
            


      

    

    

  


  
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            BibTeX

            @ARTICLE{Braynov02contractingwith,
    author = {Sviatoslav Braynov},
    title = {Contracting with uncertain level of trust},
    journal = {Computational Intelligence},
    year = {2002},
    volume = {18},
    pages = {501--514}
}


          
 
        
        
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        Abstract

        The paper investigates the impact of trust on market efficiency and bilateral contracts. We prove that a market in which agents are trusted to the degree they deserve to be trusted is as efficient as a market with complete trustworthiness. In other words, complete trustworthiness is not a necessary condition for market efficiency. We prove that distrust could significantly reduce market efficiency, and we show how to solve the problem by using appropriately designed multiagent contracts. The problem of trust is studied in the context of a bilateral negotiation game between a buyer and a seller. It is shown that if the seller’s trust equals the buyer’s trustworthiness, then the social welfare, the amount of trade, and the agents ’ utility functions are maximized. The paper also studies the efficiency of advance payment contracts as a tool for improving trustworthiness. It is proved that advance payment contracts maximize the social welfare and the amount of trade. Finally, the paper studies the problem of how to make agents truthfully reveal their level of trustworthiness. An incentive-compatible contract is defined, in which agents do not benefit from lying about their trustworthiness. The analysis and the solutions proposed in this paper could help agent designers avoid many market failures and produce efficient interaction mechanisms.

      

      
        
          Keyphrases

          
            
            uncertain level   
            
            market efficiency   
            
            social welfare   
            
            advance payment contract   
            
            complete trustworthiness   
            
            agent designer   
            
            many market failure   
            
            buyer trustworthiness   
            
            seller trust   
            
            necessary condition   
            
            efficient interaction mechanism   
            
            incentive-compatible contract   
            
            multiagent contract   
            
            bilateral contract   
            
            paper study   
            
            agent utility function   
            
            bilateral negotiation game   
            
          

        
      

    

  

  




  
  	
  	
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