Abstract

Various mechanisms are known that can stabilize trust relations. Examples are repeated interactions and credible commitments through warranties, deposits, and other kinds of ‘hostages’. Usually, these mechanisms are studied in isolation from one another. An integrated analysis is widely neglected. In this note, the effects of a ‘mix’ of mechanisms are analyzed. A simple case is offered, where a combination of repeated interactions and credible commitments can stabilize trust, while neither of the mechanisms alone can do so.