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Trust and Reciprocity in the Investment Game with Indirect Reward

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Author Info
Werner Güth (Max Planck Institute for Research into Economic Systems, Strategic Interaction Unit, Jena, Germany)
Manfred Königstein (Humboldt University at Berlin, Institute for Economic Theory III, Berlin, Germany)
Nadège Marchand (CIRANO - Center for Interuniversity Research and Analysis on Organizations, Montréal, Québec, Canada)
Klaus Nehring (Dept. of Economics, University of California, Davis, One Shields Avenue, CA, USA)

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Abstract

Experimental studies have shown that trust and reciprocity are effective in increasing efficiency when complete contracting is infeasible. One example is the study by Berg et al. (1995) of the investment game. In this game the person who receives the investment is the one who may reward the investor. This is a direct reward game. Similar to Dufwenberg et al. (2001) we investigate to what extent trust and reward are still observable when reward is indirect; i.e., when the investor may only be rewarded by a third person who did receive his investment. Furthermore, we investigate the influence of social comparison (information about other players' investments) Our main finding is that indirect reward significantly reduces mutual cooperation.

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Publisher Info
Article provided by Institute of SocioEconomics in its journal Homo Oeconomicus.

Volume (Year): 18 (2001)
Issue (Month): ()
Pages: 241-262
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Handle: RePEc:hom:homoec:v:18:y:2001:p:241-262

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Ernst Fehr & Simon Gaechter, . "Fairness and Retaliation: The Economics of Reciprocitys," IEW - Working Papers iewwp040, Institute for Empirical Research in Economics - IEW. [Downloadable!]
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  2. Willinger, Marc & Keser, Claudia & Lohmann, Christopher & Usunier, Jean-Claude, 2003. "A comparison of trust and reciprocity between France and Germany: Experimental investigation based on the investment game," Journal of Economic Psychology, Elsevier, vol. 24(4), pages 447-466, August. [Downloadable!] (restricted)
  3. Frank, Robert H & Gilovich, Thomas & Regan, Dennis T, 1993. "Does Studying Economics Inhibit Cooperation?," Journal of Economic Perspectives, American Economic Association, vol. 7(2), pages 159-71, Spring. [Downloadable!] (restricted)
  4. Werner Güth & Wolfgang Klose & Manfred Königstein & Joachim Schwalbach, 1998. "An experimental study of a dynamic principal-agent relationship," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 19(4-5), pages 327-341.
  5. Rabin, Matthew, 1993. "Incorporating Fairness into Game Theory and Economics," American Economic Review, American Economic Association, vol. 83(5), pages 1281-1302, December. [Downloadable!] (restricted)
  6. Berg Joyce & Dickhaut John & McCabe Kevin, 1995. "Trust, Reciprocity, and Social History," Games and Economic Behavior, Elsevier, vol. 10(1), pages 122-142, July. [Downloadable!] (restricted)
  7. M. Dufwenberg & U. Gneezy & W. Güth & E. van Damme, . "An Experimental Test of Direct and Indirect Reciprocity in Case of Complete and Incomplete Information," Sonderforschungsbereich 373 2000-36, Humboldt Universitaet Berlin.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Nikolaos Georgantzís & Constantine Manasakis & Evangelos Mitrokostas & Emmanuel Petrakis, 2008. "Strategic delegation in experimental duopolies with endogenous incentive contracts," Working Papers 0809, University of Crete, Department of Economics. [Downloadable!]
  2. Luca Stanca & Luigino Bruni & Marco Mantovani, 2009. "The Effect of Motivations on Social Indirect Reciprocity: an Experimental Analysis," Working Papers 169, University of Milano-Bicocca, Department of Economics, revised Aug 2009. [Downloadable!]
  3. Ben Greiner & Maria Vittoria Levati, 2003. "Indirect Reciprocity in Cyclical Networks - An Experimental Study -," Papers on Strategic Interaction 2003-15, Max Planck Institute of Economics, Strategic Interaction Group. [Downloadable!]
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