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On the Effect of Incentive Schemes on Trust and Trustworthiness

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  • Christine Harbring

Abstract

We experimentally analyze whether being exposed to different incentive schemes induces subjects to change their behavior. In particular, we investigate the effect on trust and trustworthiness measured by conducting an investment game. We implement two simple incentive schemes modeling the basic characteristics of a cooperative incentive environment in which payoffs are based on a group's performance, as well as a competitive environment in which payoffs result from individuals' relative performances. Our results indicate that trust and the expectation of trust are positively affected by being exposed to a team setting compared to a competitive tournament scheme.

Suggested Citation

  • Christine Harbring, 2010. "On the Effect of Incentive Schemes on Trust and Trustworthiness," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 166(4), pages 690-714, December.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(201012)166:4_690:oteois_2.0.tx_2-5
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    Citations

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    Cited by:

    1. Katarína Danková & Hodaka Morita & Maroš Servátka & Le Zhang, 2022. "Fairness concerns and job assignment to positions with different surplus," Southern Economic Journal, John Wiley & Sons, vol. 88(4), pages 1490-1516, April.
    2. Fehr, Dietmar & Rau, Hannes & Trautmann, Stefan T. & Xu, Yilong, 2020. "Inequality, fairness and social capital," European Economic Review, Elsevier, vol. 129(C).
    3. Jacqueline Chen Chen & Tony Tam & Yen-sheng Chiang, 2019. "The Rise of Merit-based Inequality Acceptance After Exposure to Competition: Experimental Evidence among Chinese University Students," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 144(2), pages 707-728, July.
    4. Sebastian J Goerg & Heike Hennig-Schmidt & Gari Walkowitz & Eyal Winter, 2016. "In Wrong Anticipation - Miscalibrated Beliefs between Germans, Israelis, and Palestinians," PLOS ONE, Public Library of Science, vol. 11(6), pages 1-16, June.
    5. Michèle Belot & Marcel Fafchamps, 2018. "Are People Equally Other‐Regarding When Selecting a Match Versus Choosing an Allocation?," Southern Economic Journal, John Wiley & Sons, vol. 84(4), pages 1088-1108, April.
    6. Steffen Keck & Natalia Karelaia, 2012. "Does competition foster trust? The role of tournament incentives," Experimental Economics, Springer;Economic Science Association, vol. 15(1), pages 204-228, March.
    7. Faravelli, Marco & Friesen, Lana & Gangadharan, Lata, 2015. "Selection, tournaments, and dishonesty," Journal of Economic Behavior & Organization, Elsevier, vol. 110(C), pages 160-175.
    8. Janna Ter Meer, 2014. "The indirect effect of monetary incentives on deception," Cologne Graduate School Working Paper Series 05-04, Cologne Graduate School in Management, Economics and Social Sciences.

    More about this item

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • C9 - Mathematical and Quantitative Methods - - Design of Experiments

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