Reputation functions as a commodity that assures others one will honor commitments

Evidence

A reputation for trustworthiness is not just tangential to a good economic system: it is a commodity intentionally sought by — and a constant concern of — anyone who aims at such (see Dasgupta, this volume; Akerlof 1984). Interest may generate the pressure to behave honestly, but reputation and commitment are the means by which others are assured of the effectiveness of that pressure: ‘A dealer is afraid of losing his character, and is scrupulous in observing every engagement. When a person makes perhaps 20 contracts in a day, he cannot gain so much by endeavouring to impose on his neighbour, as the very appearance of a cheat would make him lose’ (Smith 1978: 538-9, my italics).” — Diego Gambetta, Trust - Making and Breaking Cooperative…, 2856

Categorization

• XREF: This grounds Hardin’s observable-constraints argument: reputation is the observable signal that substitutes for direct monitoring.