Abstract

If contracts cannot be fully specified Pareto optimal results may be closed off because individuals cannot rationally trust each other's promises. This paper assumes that human individuals can become internally committed not to act opportunistically and that others can detect to a certain extent whether they are dealing with an uncommitted (untrustworthy) or a committed (trustworthy) partner. Adopting an `indirect evolutionary approach' we show that co-operative commitments can survive in evolutionary competition even if conventional mechanisms like repetition, reputation, contract or promising are lacking. If detection of uncommitted individuals is neither too costly nor too unreliable there will in general be a `niche' for both committed and uncommitted actors even in one off large numbers' interactions.