In economic terminology lack of trust is a typical example of a market friction. Frictions only arise in imperfect markets. For example, if a trading partner has an informational advantage about important features of a deal, an agent may fear that the trading partner will exploit this informational advantage. Hence the less informed agent may have reasons not to trust her trading partner. A moral hazard problem exists. In this monograph asymmetric information between transaction partners is considered as the major source of lack of trust in exchange.1 The goal of this chapter is to discuss the problem of trust in exchange in existing monetary theory. Section 2.2 looks at the development of the concept in former research.
KeywordsUtility Function Asymmetric Information Trading Partner Monetary Economic Moral Hazard Problem
Unable to display preview. Download preview PDF.