Scenario: Your car broke down while you were driving to class one morning. You took it to the nearest service center and were told by the mechanic that you need to pay $$500$ for the repair. You are confused whether or not to trust him. If you do not trust him, you have to take it to another service center, which is far away and inconvenient. If you trust him, he can either cooperate or defect $($do an honest job or not$).$ If he does an honest job, both of you will gain from the trade. If he does not do an honest job, he will gain $$500$ while you will lose your money. Clearly, he will gain more by defecting rather than cooperating with you.

Refer to the scenario above. Which of the following is likely to happen if the service center has a reputation of trustworthiness?

You will trust the mechanic and he will cooperate.

Neither of you will gain from trade.

Only the mechanic will gain.

You will trust the mechanic but he will defect.