Is trust an ambiguous rather than a risky decision?
AbstractAccording to an early approach, the decision to trust in the one-shot anonymous trust game is intuitively tantamount to a risky decision: the willingness to bet on the reciprocation of my investment. In a seminal study, Eckel and Wilson (2004) explored the correlation between risk attitudes (as elicited through a Holt and Laury mechanism) and the behavior of investors in the trust game. They found no correlation: trust decision cannot be viewed as a risky decision. However, since the probabilities of possible returns are unknown, we argue that trust behavior may correlate more specifically with ambiguity aversion rather than with risk aversion. We therefore modified Eckel and Wilson's experimental procedure in order to investigate the question as to whether trust is an ambiguous decision. We extended Holt and Laury switching-point elicitation mechanism between risky lotteries to ambiguous lotteries as Chrakravarty and Roy (2009) did. We then ran an experimental session including a standard one shot anonymous trust game (OSG). We found significant negative correlations between aversion to ambiguity and behavior in OSG. This result is a plea in favor of a decision-theoretical analogy between choices in ambiguous lotteries and trust-games.
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Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 32 (2012)
Issue (Month): 3 ()
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risk; ambiguity; trust; trust-game;
Find related papers by JEL classification:
- C9 - Mathematical and Quantitative Methods - - Design of Experiments
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
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