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Words Speak Louder Than Money

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Abstract

Should one use words or money to foster trust of the other party if no means of enforcing trustworthiness are available? This paper reports an experiment studying the effectiveness of two types of mechanisms for promoting trust: a costly gift and a costless message as well as their mutual interaction. We nest our findings in the standard version of the investment game. Our data provide evidence that while both stand-alone mechanisms enhance trust, and a gift performs significantly worse than a message. Moreover, when a gift is combined with sending a message, it can be counterproductive.

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File URL: http://www.econ.canterbury.ac.nz/RePEc/cbt/econwp/1113.pdf
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Bibliographic Info

Paper provided by University of Canterbury, Department of Economics and Finance in its series Working Papers in Economics with number 11/13.

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Length: 30 pages
Date of creation: 10 Apr 2011
Date of revision:
Handle: RePEc:cbt:econwp:11/13

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Keywords: Communication; content analysis; experimental economics; gift giving; investment game; message; trust; trustworthiness;

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References

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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Talk, trust & inequality
    by chris dillow in Stumbling and Mumbling on 2011-04-27 11:30:45
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Cited by:
  1. James Cox & Maroš Servátka & Radovan Vadovič, 2010. "Saliency of outside options in the lost wallet game," Experimental Economics, Springer, vol. 13(1), pages 66-74, March.
  2. Martin Dufwenberg & Maroš Servátka & Radovan Vadovič, 2012. "ABC on Deals," Working Papers in Economics 12/14, University of Canterbury, Department of Economics and Finance.
  3. Cary Deck & Maroš Servátka & Steven Tucker, 2013. "An examination of the effect of messages on cooperation under double-blind and single-blind payoff procedures," Experimental Economics, Springer, vol. 16(4), pages 597-607, December.
  4. Richter, Andries & van Soest, Daan & Grasman, Johan, 2013. "Contagious cooperation, temptation, and ecosystem collapse," Journal of Environmental Economics and Management, Elsevier, vol. 66(1), pages 141-158.
  5. Ben-Ner, Avner & Putterman, Louis & Ren, Ting, 2011. "Lavish returns on cheap talk: Two-way communication in trust games," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(1), pages 1-13, February.
  6. 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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