Building and Rebuilding Trust with Promises and Apologies
AbstractUsing trust games, we study how promises and messages are used to build new trust where it did not previously exist and to rebuild damaged trust. In these games, trustees made non-binding promises of investment-contingent returns, then investors decided whether to invest, and finally trustees decided how much to return. After an unexpected second game was announced, but before it commenced, trustees could send a one-way message. This design allowed us to observe the endogenous emergence and natural distribution of trust-relevant behaviors and focus on naturally occurring remedial strategies used by promise-breakers and distrusted trustees, their effects on investors, and subsequent outcomes. In the first game 16.6% of trustees were distrusted and 18.8% of trusted trustees broke promises. Trustees distrusted in the first game used long messages and promises closer to equal splits to encourage trust in the second game. To restore damaged trust, promise-breakers used apologies and upgraded promises. On average, investments in each game paid off for investors and trustees, suggesting that effective use of cheap signals fosters profitable trust-based exchange in these economies.
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Bibliographic InfoPaper provided by Chapman University, Economic Science Institute in its series Working Papers with number 12-19.
Length: 47 pages
Date of creation: 2012
Date of revision:
promise; atonement; apology; cheap talk; cheap signals; trust game; trust building; remedial strategies; reciprocity; experiments;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-22 (All new papers)
- NEP-EVO-2012-09-22 (Evolutionary Economics)
- NEP-EXP-2012-09-22 (Experimental Economics)
- NEP-GTH-2012-09-22 (Game Theory)
- NEP-SOC-2012-09-22 (Social Norms & Social Capital)
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