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Building and rebuilding trust with promises and apologies

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  • Schniter, Eric
  • Sheremeta, Roman M.
  • Sznycer, Daniel

Abstract

Using trust games, we study how promises and messages are used to build new trust where it did not previously exist and to rebuild damaged trust. In these games, trustees made non-binding promises of investment-contingent returns, then investors decided whether to invest, and finally trustees decided how much to return. After an unexpected second game was announced, but before it commenced, trustees could send a one-way message. This design allowed us to observe the endogenous emergence and natural distribution of trust-relevant behaviors and focus on naturally occurring remedial strategies used by promise-breakers and distrusted trustees, their effects on investors, and subsequent outcomes. In the first game 16.6% of trustees were distrusted and 18.8% of trusted trustees broke promises. Trustees distrusted in the first game used long messages and promises closer to equal splits to encourage trust in the second game. To restore damaged trust, promise-breakers used apologies and upgraded promises. On average, investments in each game paid off for investors and trustees, suggesting that effective use of cheap signals fosters profitable trust-based exchange in these economies.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 94 (2013)
Issue (Month): C ()
Pages: 242-256

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Handle: RePEc:eee:jeborg:v:94:y:2013:i:c:p:242-256

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

Related research

Keywords: Promise; Atonement; Apology; Cheap talk; Cheap signals; Trust game; Trust building; Remedial strategies; Reciprocity; Experiments;

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Citations

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Cited by:
  1. Roman M. Sheremeta, 2013. "Overbidding and Heterogeneous Behavior in Contest Experiments," Working Papers 13-06, Chapman University, Economic Science Institute.
  2. Verena Utikal, 2013. "I am sorry - Honest and Fake Apologies," Working Paper Series of the Department of Economics, University of Konstanz 2013-18, Department of Economics, University of Konstanz.
  3. Erik O. Kimbrough & Jared Rubin & Roman M. Sheremeta & Timothy Shields, 2013. "Commitment Problems in Conflict Resolution," Working Papers 13-11, Chapman University, Economic Science Institute.
  4. Johnsen, Åshild A & Kvaløy, Ola, 2014. "You always meet twice: An experiment on intrinsic versus instrumental reciprocity," UiS Working Papers in Economics and Finance 2014/2, University of Stavanger.
  5. McCarter, Matthew & Sheremeta, Roman, 2013. "You Can’t Put Old Wine in New Bottles: The Effect of Newcomers on Coordination in Groups," MPRA Paper 43532, University Library of Munich, Germany.
  6. Eric Schniter & Roman M. Sheremeta & Timothy W. Shields, 2013. "Limitations to Signaling Trust with All or Nothing Investments," Working Papers 13-24, Chapman University, Economic Science Institute.
  7. Eric Schniter & Roman M. Sheremeta, 2014. "Predictable and Predictive Emotions: Explaining Cheap Signals and Trust Re-Extension," Working Papers 14-07, Chapman University, Economic Science Institute.
  8. Eric Schniter & Roman M. Sheremeta & Timothy W. Shields, 2013. "Conflicted Emotions Following Trust-based Interaction," Working Papers 13-28, Chapman University, Economic Science Institute.

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