Costly information, not infrequent trade, is the core obstacle to honest exchange.

Evidence

We argue in section 2 that even if no pair of traders come together frequently, if each individual trades frequently enough within the community of traders, then transferable reputations for honesty can serve as an adequate bond for honest behavior if members of the trading community can be kept informed about each other’s past behavior. Well informed traders could boycott those who have violated community norms of honesty, if only they knew who the violators were. It is the costliness of generating and communicating information - rather than the infrequency of trade in any particular bilateral relationship - that, we argue, is the problem that the system of private enforcement was designed to overcome. — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 13

Categorization

• XREF: connects to: Trustworthy behavior requires some information cost, but imperfect information can suffice. — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 131; Full information about all traders’ histories is costly and unnecessary for efficient trade; Long-distance trade needs institutions to fill knowledge gaps about others’ honesty (+6 more)

Related

• Full-history information institutions are too costly for efficient trade (similarity 0.90)
• Costly information is what breaks informal trade enforcement. (similarity 0.90)
• Reputation systems need cheap information flow, not frequent repeated trade, to enforce honesty. (similarity 0.89)
• Trustworthy behavior requires some information cost, but imperfect information can suffice. (similarity 0.88)
• Long-distance trade undermines honest behavior among strangers without institutions. (similarity 0.87)
• Some enforcement costs are unavoidable for sustaining honest exchange. (similarity 0.83)
• Institutions emerge where information is costly, not where enforcement is absent. (similarity 0.83)
• Word-of-mouth reputation alone cannot sustain honest trade. (similarity 0.82)
• Long-distance trade needs institutions to fill knowledge gaps about others’ honesty (similarity 0.82)
• Bilateral reputation systems fail because information and sanctioning are costly public goods (similarity 0.81)
• Reputation systems fail because monitoring and sanctioning are costly public goods. (similarity 0.80)
• Information about partners’ past behavior is essential for punishing cheaters. (similarity 0.80)
• Trade institutions must solve both an information and a punishment-motivation problem (similarity 0.79)
• Trustworthiness cannot be communicated as objective market information. (similarity 0.79)
• Group-wide reputation can bond honest behavior even between strangers who rarely meet. (similarity 0.78)

Broader Connections

• Full information about all traders’ histories is costly and unnecessary for efficient trade #expands (0.88)
• Trustworthy behavior requires some information cost, but imperfect information can suffice. #corroborates (0.86) — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 131
• Trust arises not from powerlessness but from lack of full information about others. #corroborates (0.85) — Anthony Giddens, The Consequences of Modernity, 84
• Long-distance trade needs institutions to fill knowledge gaps about others’ honesty #expands (0.82)
• Trust is willed action taken despite an information deficit. #corroborates (0.80)