I think that Doug has already quoted our Dean, David Rasmussen, as stating that the market mechanism has more to do with trust than it does with greed. I saw a perfect example of this last weekend. My wife in I were in a very busy express check-out line at Publix. Needless to predict, it was one of our couple of items that wouldn’t scan. I don’t know how many times I have been in this position in other stores that the checker has been required to shut down the entire line, find an available employee, and hope that the employee could find the price of the identical product back on the shelves. On this day, however, the checker asked if we remembered the price. It turns out that we had discussed the price, so Sue recalled it. The checker entered the price into the register. Publix got what it was owed. We paid what we were obligated. And all of those people behind us in the line had a more pleasant day, all because Public allowed this checker to engage in some trust.
This is not to suggest that if we had said “5 cents” that the checker would have been obligated to accept our assertion. There was some implicit monitoring in the background. Nevertheless, I suspect that there is some way to incorporate the implicit monitoring and still predict sub-optimal outcomes from a game-theoretic model. But as Doug has repeatedly told me, we are not simply colonies of game theorists; instead we are also anchored by a moral compass. And as Dean Rasmussen says, markets are about trust. Over some ranges of the environment, Publix allows trust, and everyone in this market situation is better off. If this is a global phenomenon, I would predict that Publix has higher profits than otherwise. So one question I have is: Why don’t other stores also allow their checkers some discretion for trust? Is it geographic area? Headquarters corporate culture? Local manager option?