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Trust and truth

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Author Info

  • Ellingsen, Tore

    ()
    (Dept. of Economics, Stockholm School of Economics)

  • Johannesson, Magnus

    ()
    (Dept. of Economics, Stockholm School of Economics)

  • Lilja, Jannie

    ()
    (Department of Peace and Conflict Research, Uppsala University)

  • Zetterqvist, Henrik

    ()
    (Hilti)

Abstract

In a laboratory experiment, we create relationships between pairs of anonymous subjects through a Prisoners' dilemma game. Thereafter the same subjects play a private values (sealed-bid double auction) bargaining game with or without communication. Communication substantially increases bargaining efficiency among subjects who cooperated in the Prisoners' dilemma, but has no significant effect on bargaining outcomes when one subject defected. Subjects who cooperated in the Prisoners' dilemma bid more aggresively if their opponent defected. Cooperators also lie more about their valuations when their opponent defected: Compared to the case of mutual cooperation, the cooperators' rate of honest revelation decreases from 64% to 6% and the rate of outright deception increases from 7% to 53%. Our results provide qualitatively new evidence that many people are strong recipricators: They are willing to bear private costs in order to reward good behavior and punish bad behavior, even when the rewards and punishments are unobservable.

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Bibliographic Info

Paper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 665.

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Length: 39 pages
Date of creation: 01 Nov 2006
Date of revision:
Handle: RePEc:hhs:hastef:0665

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Keywords: Bargaining; Communication; Honesty; Trust; Strong reciprocity;

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Cited by:
  1. Andersson, Ola & Wengström, Erik, 2012. "Credible communication and cooperation: Experimental evidence from multi-stage Games," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 81(1), pages 207-219.
  2. Conrads, Julian & Irlenbusch, Bernd & Rilke, Rainer Michael & Walkowitz, Gari, 2011. "Lying and Team Incentives," IZA Discussion Papers 5968, Institute for the Study of Labor (IZA).
  3. Xiao, Erte, 2013. "Profit-seeking punishment corrupts norm obedience," Games and Economic Behavior, Elsevier, Elsevier, vol. 77(1), pages 321-344.
  4. Julie Rosaz & Marie-Claire Villeval, 2011. "Lies and Biased Evaluation : A Real-Effort Experiment," Working Papers, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure 1124, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  5. Galanis, Spyros & Vlassopoulos, Michael, 2014. "Concern for relative standing and deception," Discussion Paper Series In Economics And Econometrics, Economics Division, School of Social Sciences, University of Southampton 1403, Economics Division, School of Social Sciences, University of Southampton.
  6. López-Pérez, Raúl, 2012. "The power of words: A model of honesty and fairness," Journal of Economic Psychology, Elsevier, Elsevier, vol. 33(3), pages 642-658.
  7. Andersson, Ola & Wengström, Erik, 2007. "More Communication, Less Cooperation: Experimental Evidence from Multi-stage Games," Working Papers, Lund University, Department of Economics 2007:4, Lund University, Department of Economics, revised 24 Nov 2010.
  8. López-Pérez, Raúl, 2009. "The Power of Words: Why Communication fosters Cooperation and Efficiency," Working Papers in Economic Theory 2009/01, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History).

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