N.T. Nguyen et al. (Eds.): IEA/AIE 2008, LNAI 5027, pp. 492–501, 2008. © Springer-Verlag Berlin Heidelberg 2008 Individualism and Collectivism in Trade Agents Gert Jan Hofstede 1 , Catholijn M. Jonker 2 , and Tim Verwaart 3 1 Wageningen University, Postbus 9109, 6700 HB Wageningen gertjan.hofstede@wur.nl 2 Delft University of Technology, Mekelweg 4, 2628 CD Delft c.m.jonker@tudelft.nl 3 LEI Wageningen UR, Postbus 29703, 2502 LS den Haag tim.verwaart@wur.nl Abstract. Agent-Based Modeling can contribute to the understanding of inter- national trade processes. Models for the effects of culture and cultural differ- ences on agent behavior are required for realistic agent-based simulation of international trade. This paper makes a step toward modeling of culture in agents. The focus is one of the five dimensions of culture according to Hofstede: individualism versus collectivism. The paper presents an analysis based on social science literature about national cultures. For cultural differen- tiation of agent behavior, rules are formulated for individualist versus collectiv- ist agent behavior with respect to negotiations, cooperation or defection in the delivery phase of transactions, trade partner selection, and trust. Example com- putations demonstrate the feasibility in multi-agent simulations. Keywords: culture, negotiation, deceit, trust, simulation. 1 Introduction Agent-Based Economics (ABE) studies economic processes as interactions of indi- vidual actors [1]. Cultural differences are known to have their effects on international business interactions and on trust between business partners [2]. Gorobets and Noote- boom [3] argue on the basis of a multi-agent simulation that different economic systems could be viable in societies with different levels of trust. Models of culture- bound agents will advance the understanding through ABE of intercultural trade proc- esses as well as differences in trade processes across cultures. Culture has different aspects or dimensions [4]. The current paper focuses on the widely recognized distinction between individualistic and collectivistic cultures. Section 2 presents this distinction as it is described in the social sciences. Section 3 analyzes its effect on trade processes as the basis for the formal modeling in section 4. Section 5 presents example computations. The results and future directions of this research are discussed in section 6. 2 The Cultural Dimension of Individualism and Collectivism People are gregarious by nature. But the life conditions of societies vary, and they have adapted accordingly. Hunter-gatherers live in small bands, usually consisting of a few