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Sequential versus Simultaneous Trust

Author

Listed:
  • Till Gross
  • Maroš Servátka
  • Radovan Vadovič

Abstract

We examine theoretically and experimentally the implications of trust arising under sequential and simultaneous designs, where one player makes an investment choice, and another player decides whether to share the investment gains. We show analytically that in some cases the sequential design may be outperformed by the simultaneous design. In an experiment we find that the investment levels and sharing rates are higher in the sequential design, but there are no corresponding differences in beliefs. We conjecture that this happens because in the sequential design substantially more trust is necessary to induce cooperation. Our data strongly support this conjecture.

Suggested Citation

  • Till Gross & Maroš Servátka & Radovan Vadovič, 2020. "Sequential versus Simultaneous Trust," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 176(3), pages 446-472.
    • Handle: RePEc:mhr:jinste:urn:doi:10.1628/jite-2020-0033
    DOI: 10.1628/jite-2020-0033
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    More about this item

    Keywords

    trust; investment; efficiency; institutional design;
    All these keywords.

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D9 - Microeconomics - - Micro-Based Behavioral Economics

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