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Three-Player Trust Game with Insider Communication

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Author Info

  • Roman M. Sheremeta

    (Argyros School of Business and Economics, Chapman University)

  • Jingjing Zhang

    (University of Zurich)

Abstract

We examine behavior in a three-player trust game in which the first player may invest in the second and the second may invest in the third. Any amount sent from one player to the next is tripled. The third player decides the final allocation among three players. The baseline treatment with no communication shows that the first and second players send significant amounts and the third player reciprocates. Allowing insider communication between the second and the third players increases cooperation between these two. Interestingly, there is an external effect of insider communication: the first player who is outside communication sends 54% more and receives 289% more than in the baseline treatment. As a result, insider communication increases efficiency from 44% to 68%.

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Bibliographic Info

Paper provided by Chapman University, Economic Science Institute in its series Working Papers with number 13-03.

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Length: 52 pages
Date of creation: 2013
Date of revision:
Handle: RePEc:chu:wpaper:13-03

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Keywords: three-player trust games; experiments; reciprocity; communication;

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Cited by:
  1. Thomas A. Rietz & Roman M. Sheremeta & Timothy W. Shields & Vernon L. Smith, 2011. "Transparency, Efficiency and the Distribution of Economic Welfare in Pass-Through Investment Trust Games," Working Papers 11-03, Chapman University, Economic Science Institute.

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