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Trust, communication and contracts: An experiment

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Author Info
Ben-Ner, Avner
Putterman, Louis

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Abstract

In the one-shot trust or investment game without opportunities for reputation formation or contracting, economic theory predicts no trusting because there is no incentive for trustworthiness. Under these conditions, theory predicts (a) no effect of pre-play communication, and (b) universal preference for moderate cost binding contracts over interacting without contracts. We introduce the opportunities to engage in pre-play communication and to enter binding or non-binding contracts, and find (a) communication increases trusting and trustworthiness, (b) contracts are largely unnecessary for trusting and trustworthy behaviors and are eschewed by many players, (c) more trusting leads to higher earnings, and (d) both trustors and trustees favor "fair and efficient" proposals over the more unequal proposals predicted by theory.

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File URL: http://www.sciencedirect.com/science/article/B6V8F-4VKDMPK-2/2/d2df061f63a82357504a5d8bff788f7f
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Publisher Info
Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 70 (2009)
Issue (Month): 1-2 (May)
Pages: 106-121
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Handle: RePEc:eee:jeborg:v:70:y:2009:i:1-2:p:106-121

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Web page: http://www.elsevier.com/locate/jebo

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Related research
Keywords: Trust game Trust Trustworthiness Reciprocity Commitment Communication;

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  16. Bohnet, Iris & Zeckhauser, Richard, 2004. "Trust, risk and betrayal," Journal of Economic Behavior & Organization, Elsevier, vol. 55(4), pages 467-484, December. [Downloadable!] (restricted)
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  20. Talbot Page & Louis Putterman & Bulent Unel, 2005. "Voluntary Association in Public Goods Experiments: Reciprocity, Mimicry and Efficiency," Economic Journal, Royal Economic Society, vol. 115(506), pages 1032-1053, October. [Downloadable!] (restricted)
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  21. James Jr., Harvey S., 2002. "The trust paradox: a survey of economic inquiries into the nature of trust and trustworthiness," Journal of Economic Behavior & Organization, Elsevier, vol. 47(3), pages 291-307, March. [Downloadable!] (restricted)
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