Limitations to Signaling Trust with All or Nothing Investments
AbstractMany economic interactions are characterized by “all or nothing” action spaces that may limit a demonstrable index of trust and, therefore, the propensity to reciprocate. In two experimental trust games, the action space governing investments was manipulated to examine the effects on investments and reciprocity. In the continuous game the investor could invest any amount between $0 and $10, while in the binary game the investor could invest either $0 or $10. In both games, the trustee received the tripled investment and then could return any amount back to the investor. Investors invested significantly more in the binary game than in the continuous game. However, higher investments in the binary game did not lead to more reciprocity. To the contrary, conditional on investment of $10, on average trustees returned significantly less in the binary game than in the continuous game.
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Bibliographic InfoPaper provided by Chapman University, Economic Science Institute in its series Working Papers with number 13-24.
Length: 20 pages
Date of creation: 2013
Date of revision:
trust game; signaling; demonstrable index of trust; reciprocity; experiments;
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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-10-18 (All new papers)
- NEP-EVO-2013-10-18 (Evolutionary Economics)
- NEP-EXP-2013-10-18 (Experimental Economics)
- NEP-GTH-2013-10-18 (Game Theory)
- NEP-SOC-2013-10-18 (Social Norms & Social Capital)
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