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Trust, communication and contracts: An experiment

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  • Ben-Ner, Avner
  • Putterman, Louis

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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Bibliographic 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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For corrections or technical questions regarding this item, or to correct its listing, contact: (Jeroen Loos).

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Keywords: Trust game Trust Trustworthiness Reciprocity Commitment Communication;

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References

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Cited by:
  1. Maroš Servátka & Steven Tucker & Radovan Vadovic, 2009. "Building Trust One Gift at a Time," Working Papers in Economics 09/11, University of Canterbury, Department of Economics and Finance.

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