An agent-based skeleton of the network-based trust games

This paper presents an agent-based model of the networkbased trust game by combing two essential ingredients, namely new economic geography and cooperative games. Through simulating this model, we would like to show the coevolution of trusts, networks, economic growth and income distribution. Variations of the proposed design allow us to examine the role of social trust in economic growth and can allow us to further explore the effect of culture and personality in the trust-based growth theory. 1. MOTIVATION AND BACKGROUND It has been well-acknowledged by economists that social trust, as well as social capital and social networks, is considered as part of nature and a cause of the wealth of nations. The empirical research conducted so far largely supports the hypothesis that trust has a positive effect on economic growth, even if its relative importance compared to other factors is an issue still debated (Knack and Keefer, 1997; Zak and Knack, 2001; Beugelsdijk, de Groot, and van Schaik, 2004; Dearmona and Grier, 2009; Algan and Cahuc, 2010). Nonetheless, trust is not a simple static concept. Neither is it an isolated component, which can be studied by disentangling it from other social entities. On the contrary, it is constantly evolving with social embeddedness and complexities, acting and reacting upon it. Therefore, a formal model to harness the essences of trust dynamics can be useful, whereas a simple analytical model may not be sufficient enough to accommodate its rich surroundings, such as social networks, social norms, mechanism designs and cultures.