The Fragility and Robustness of Trust

Although it is well known that trust is an important component of the fulfilment of incomplete contracts, less is known regarding how robust it is to past experiences. We present an experiment in which trust is required for transactions to occur, and nature provides a series of shocks along the path of play. Although the shocks have a short-term impact, we find that trust is surprisingly robust in the long-term. We argue that trust, through fragile in one way, is in another way more robust and stable over time than previously known. The results shed light on the resilence of economic institutions with incomplete contracts.