Social Norms, Information and Trust among Strangers: Theory and Evidence
AbstractCan a social norm of trust and reciprocity emerge among strangers? We investigate this question by examining behavior in an experiment where subjects repeatedly play a two-player binary â€•trustâ€– game. Players are randomly and anonymously paired with one another in each period. The main questions addressed are whether a social norm of trust and reciprocity emerges under the most extreme information restriction (anonymous community-wide enforcement) or whether trust and reciprocity require additional, individual-specific information about a playerâ€™s past history of play and whether that information must be provided freely or at some cost. In the absence of such reputational information, we find that a social norm of trust and reciprocity is difficult to sustain. The provision of reputational information on past individual decisions significantly increases trust and reciprocity, with longer histories yielding the best outcomes. Importantly, we find that making reputational information available at a small cost may also lead to a significant improvement in trust and reciprocity, despite the fact that most subjects do not choose to purchase this information.
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Bibliographic InfoPaper provided by Concordia University, Department of Economics in its series Working Papers with number 08007.
Length: 49 pages
Date of creation: Aug 2008
Date of revision: Jul 2001
Social Norms; Trust Game; Random Matching; Trust and Reciprocity; Information; Reputational Mechanisms; Experimental Economics.;
Other versions of this item:
- John Duffy & Huan Xie & Yong-Ju Lee, 2013. "Social norms, information, and trust among strangers: theory and evidence," Economic Theory, Springer, vol. 52(2), pages 669-708, March.
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-01-03 (All new papers)
- NEP-CBE-2009-01-03 (Cognitive & Behavioural Economics)
- NEP-EVO-2009-01-03 (Evolutionary Economics)
- NEP-EXP-2009-01-03 (Experimental Economics)
- NEP-GTH-2009-01-03 (Game Theory)
- NEP-SOC-2009-01-03 (Social Norms & Social Capital)
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