9
term
j
4
ε
is i.i.d. normal under this regime. Linearity is assumed during estimation.
Here, a positive and significant estimated coefficient on
j
i
i
s
r
Exp
])
/
[
(
suggests that,
to some extent, trustors are effectively predicting trustworthiness within the context of
the game and conditioning their behaviour accordingly.
The ideal proxy for
j
i
X
R
Exp
)])
(
[
(
1
is the average predicted trustworthiness of each
trustors’ set of potential trustees, where the predictions are derived using the
estimation of equation 1. A prediction can be made for all potential trustees. Then the
average predicted trustworthiness relating to each trustor’s set of potential trustees can
be calculated and these averages can be used to estimate the function
j
j
i
j
j
X
R
Exp
Z
T
y
s
5
1
)
)])
(
[
(
,
(
/
ε
+
=
(5)
where the error term
j
5
ε
is assumed to be i.i.d. normal. Linearity is assumed during
estimation. Here, a positive and significant coefficient on
j
i
X
R
Exp
)])
(
[
(
1
suggests
that the trustors’ model of trustworthiness is similar to the estimation of equation 1
and that they are conditioning their behaviour accordingly.
If equation 3c is substituted back into equation 2 and linearity is assumed, we arrive at
a function of the form
j
ij
ij
j
j
C
X
Z
F
y
s
6
2
)
,
,
(
/
ε
+
=
(6)
where the vector
ij
X
2
contains the means of the elements in
i
X
2
for the jth trustors’
set of potential trustees, the vector
ij
C contains the means of the elements in
ij
C
, and
j
6
ε
is assumed to be i.i.d. normal. Again assuming linearity, if
ij
X
2
and
i
X
1
contain
corresponding elements, a comparison of the coefficients on those elements in
Convention