Transaction trust in normative multiagent systems

SSRN Electronic Journal, 2000

New enforcement strategies allow agents to gain the regulator's trust and consequently face a lower audit probability. Prior research suggests that, in order to prevent lower compliance, a reduction in the audit probability (the "carrot") must be compensated with the introduction of a higher penalty for non-compliance (the "stick"). However, such carrot-and-stick strategies reflect neither the concept of trust nor the strategies observed in practice. In response to this, we define trust-based regulation as a strategy that incorporates rules that allow trust to develop, and using a generic (non-cooperative) game of tax compliance, we examine whether trust-based regulation is feasible (i.e., whether, in equilibrium, a reduction in the audit probability, without ever increasing the penalty for non-compliance, does not lead to reduced compliance). The model shows that trust-based regulation is feasible when the agent sufficiently values the future. In line with the concept of trust, this strategy is feasible when the regulator is uncertain about the agent's intentions. Moreover, the model shows that (i) introducing higher penalties makes trust-based regulation less feasible, and (ii) combining trust and forgiveness can lead to a lower audit probability for both trusted and distrusted agents. Policy recommendations often point toward increasing deterrence. This model shows that the opposite can be optimal.

2012

Research on negotiation and task allocation has been in the multi-agent systems realm since its inception as a research field. More recently, social aspects of agent-hood have received increasing attention, namely developing on the fields of normative and trust systems. The integration of these different research contributions will allow to build robust applications for electronic agreement negotiation, aiming at their acceptability and application in industry.

By: Ray Kerkmez; LLM, MDR

In a cultural setting, trust is important in strengthening the bond of members of the community. This plays a major role in making the members to have a feeling of identity eventually creating solidarity and cooperation in the community. In the business setting, trust is important in the relationship between the service providers and the customers. A culture of trust brings along improved co-operation and lowered transaction costs, therefore opening possibilities of more experiences and actions. [1] However, many people avoid application of trust in certain activities where self-centered interest is their main concern. [2] This is especially evident in a business setting whereby bargaining is applied. In a transaction, trust is a vital component; this is because it involves risk as an element. The outcome of the transaction does not depend only on action of the actor but on the action of several actors. One of the actors must take the risk of trusting the other actors on the outcome, thus transaction is a form of trust relation >>>

2009

In the one-shot trust or investment game without opportunities for reputation formation or contracting, economic theory predicts no trusting because there is no incentive for trustworthiness. Under these conditions, theory predicts (a) no effect of pre-play communication, and (b) universal preference for moderate cost binding contracts over interacting without contracts.

According to The Macquarie Dictionary, the word ‘trust’ has more than 20 interpretations in English. Therefore, it is important to specify the way in which the word is being used in any discourses about managerial and economic issues. In what respect and to what extent are economic agents to be trusted in their dealings with others. When economic agents are untrustworthy, this adds to economic transaction costs, reduces the level of economic activity and the achievable level of economic welfare as well as potential gains from growing globalisation. Several adverse economic consequences of lack of business trust are explored along with their consequences for the process of globalisation. Business co-operation and alliances can be important for gaining access to international markets, particularly for small and medium-sized firms. Middle traders can play an important role through their cooperation with smaller producers in enabling their products to be exported. However, suppliers at the bottom of the exchange chain tend to become locked into such cooperative arrangements. This can result in their economic exploitation and growing mistrust of such arrangements. Furthermore, once exploitation by a few middlemen occurs, competitors may be forced to follow their practice. Hence, the bad middlemen drive out the good and cooperative institutional arrangements can be expected to collapse with adverse impacts on economic activity, welfare and exports. Trust is also important in relation to most contracts and the sale of goods. As pointed out by Williamson, most contracts are incomplete and rely for their full execution on some degree of trust or unspecified expectations. There ‘reasonable’ expectations may vary from country to country and this creates a challenge for global transactions. Furthermore, trust problems are important in relation to principal-agent contracts which are invariably incomplete. Global operations of businesses can provide extra scope for agents to engage in deviant behaviour. Sale of goods can also involve distrust. Scope for fraud and misrepresentation of goods can increase when there is considerable distance between the traders as is often the case in global exchanges. This limits the incentive for trade and can result in market failure and a loss of economic welfare. It reduces the potential extent of and benefits from economic globalisation. Measures that can or have been adopted to reduce these problems are outlined.

2014

2004

Abstract Trust negotiation is a promising approach for establishing trust in open systems like the Internet, where sensitive interactions may often occur among entities with no prior knowledge of each other. In this article, the authors present a model for trust negotiation systems, and delineate the desiderata that ideal trust negotiation systems should satisfy. In defining trust negotiation requirements, they consider two different issues, policy language requirements and system requirements.

China Economic Review, 2001

This paper offers a theory to explain in the Chinese context how interfirm transactions can be effectively carried out in the absence of a sound contract enforcement system. Noting that the development of China's nonstate sector, the primary contributor to its rapid economic growth, has relied heavily on its transactional relationships with the state sector, we develop an agency theory of interfirm transactions based on the following idea: a state enterprise manager, being an agent, may acquire private benefits in exchange for not holding up a nonstate trading partner; and this, in turn, improves the latter's incentive for transaction-specific investments.

In this paper we address the problem of how the autonomy of agents in an organization can be enhanced by means of contracts. Contracts are modelled as legal institutions: systems of legal rules which allow to change the regulative and constitutive rules of an organization. The methodology we use is to attribute to organizations mental attitudes, beliefs, desires and goals, and to take into account their behavior by using recursive modelling.

The goal of the project is to explore main determinants of transaction governance mode between manufacturer and distributor firms. The model proposed in this paper integrates the concept of trust with main transaction cost economics’ dimensions and is formulated in the form of multinomial logit function. The model will be estimated with data from a sample of Georgian manufacturing industry. The main hypothesis of the study is that trust will modify the influence of traditional transaction cost economics dimensions on the choice of exchange governance mode.