Trust, Reciprocity and Rules
AbstractIn the absence of enforceable contracts, many economic and personal interactions rely on trust and reciprocity. Research shows that although this reliance often works well, sometimes it breaks down. Simple rules mandating minimum standards on reciprocation prevent the most egregious trust violations, but may also undermine behavior that would have otherwise produced higher overall economic welfare. We test the efficacy of exogenously imposed minimum return rules using experimental trust games. We find that rules fail to increase trust and trustworthiness. Thus low minimum standards significantly decrease economic welfare. Although sufficiently restrictive rules restore welfare, trust and trustworthy behavior never returns.
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Bibliographic InfoPaper provided by Chapman University, Economic Science Institute in its series Working Papers with number 11-06.
Length: 50 pages
Date of creation: 2011
Date of revision:
trust games; experiments; reputation; information; reciprocity;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-09-16 (All new papers)
- NEP-CBE-2011-09-16 (Cognitive & Behavioural Economics)
- NEP-EVO-2011-09-16 (Evolutionary Economics)
- NEP-EXP-2011-09-16 (Experimental Economics)
- NEP-GTH-2011-09-16 (Game Theory)
- NEP-HPE-2011-09-16 (History & Philosophy of Economics)
- NEP-SOC-2011-09-16 (Social Norms & Social Capital)
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