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Is trust an ambiguous rather than a risky decision

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  • Sacha Bourgeois-Gironde

    ()
    (IJN - Institut Jean-Nicod - CNRS : UMR8129 - École normale supérieure [ENS] - Paris - École des Hautes Études en Sciences Sociales (EHESS), LEM - Laboratoire d'Économie Moderne - Université Paris II - Panthéon-Assas : EA4442)

  • Anne Corcos

    (LEM - Laboratoire d'Économie Moderne - Université Paris II - Panthéon-Assas : EA4442)

  • François Pannequin

    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, ENS Cachan - École Normale Supérieure de Cachan - École normale supérieure (ENS) - Cachan)

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    Abstract

    According to an early approach, the decision to trust in the one-shot anonymous trust game is intuitively tantamount to a risky decision: the willingness to bet on the reciprocation of my investment. In a seminal study, Eckel and Wilson (2004) explored the correlation between risk attitudes (as elicited through a Holt and Laury mechanism) and the behavior of investors in the trust game. They found no correlation: trust decision cannot be viewed as a risky decision. However, since the probabilities of possible returns are unknown, we argue that trust behavior may correlate more specifically with ambiguity aversion rather than with risk aversion. We therefore modified Eckel and Wilson's experimental procedure in order to investigate the question as to whether trust is an ambiguous decision. We extended Holt and Laury switching-point elicitation mechanism between risky lotteries to ambiguous lotteries as Chrakravarty and Roy (2009) did. We then ran an experimental session including a standard one shot anonymous trust game (OSG). We found significant negative correlations between aversion to ambiguity and behavior in OSG. This result is a plea in favor of a decision-theoretical analogy between choices in ambiguous lotteries and trust-games.

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    Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number ijn_00734563.

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    Date of creation: 10 Aug 2012
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    Publication status: Published, Economics Bulletin, 2012, 32, 3, 2255-2266
    Handle: RePEc:hal:cesptp:ijn_00734563

    Note: View the original document on HAL open archive server: http://jeannicod.ccsd.cnrs.fr/ijn_00734563
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    Keywords: trust; risk aversion; ambiguity;

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    1. Sujoy Chakravarty & Jaideep Roy, 2009. "Recursive expected utility and the separation of attitudes towards risk and ambiguity: an experimental study," Theory and Decision, Springer, vol. 66(3), pages 199-228, March.
    2. Cohen, Michele & Jaffray, Jean-Yves & Said, Tanios, 1987. "Experimental comparison of individual behavior under risk and under uncertainty for gains and for losses," Organizational Behavior and Human Decision Processes, Elsevier, vol. 39(1), pages 1-22, February.
    3. Eckel, Catherine C. & Wilson, Rick K., 2004. "Is trust a risky decision?," Journal of Economic Behavior & Organization, Elsevier, vol. 55(4), pages 447-465, December.
    4. Houser, Daniel & Schunk, Daniel & Winter, Joachim, 2010. "Distinguishing trust from risk: An anatomy of the investment game," Journal of Economic Behavior & Organization, Elsevier, vol. 74(1-2), pages 72-81, May.
    5. Berg Joyce & Dickhaut John & McCabe Kevin, 1995. "Trust, Reciprocity, and Social History," Games and Economic Behavior, Elsevier, vol. 10(1), pages 122-142, July.
    6. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
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    Cited by:
    1. Anne Corcos François Pannequin & Sacha Bourgeois-Gironde, 2012. "Aversions to trust," Post-Print ijn_00734564, HAL.
    2. Fairley, Kim & Sanfey, Alan & Vyrastekova, Jana & Weitzel, Utz, 2012. "Social risk and ambiguity in the trust game," MPRA Paper 42302, University Library of Munich, Germany.

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