Trustworthiness & creditworthiness
June 7, 2006
"People are trustworthy if they try to do what they say they will do. People are creditworthy if they can do what they say they will do. Since people often will not or cannot do what they promise, market institutions must be designed to effectively and inexpensively enforce contracts. Pay close attention to the mechanisms which ensure that traders will settle their trades. Attempts to solve trustworthiness and creditworthiness problems explain much of the structure of market institutions."
One of the functions of brokers in financial markets is to resolve trust and credit issues. The ebay reputation system addresses trustworthiness, but not creditworthiness, which is a big outstanding issue for any new market model.