Trust, Communication and Contracts: An Experiment
AbstractIn the one-shot trust or investment game without opportunities for reputation formation or contracting, economic theory predicts no trusting because there is no incentive for trustworthiness. Under these conditions, theory predicts (a) no effect of pre-play communication, and (b) universal preference for moderate cost binding contracts over interacting without contracts. We introduce the opportunities to engage in pre-play communication and to enter binding or non-binding contracts, and find (a) communication increases trusting and trustworthiness, (b) contracts are largely unnecessary for trusting and trustworthy behaviors and are eschewed by many players, and (c) more trusting leads to higher earnings, and (d) both trustors and trustees favor “fair and efficient” proposals over the more unequal proposals predicted by theory.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Human Resources and Labor Studies, University of Minnesota (Twin Cities Campus) in its series Working Papers with number 0206.
Date of creation:
Date of revision:
Contact details of provider:
Postal: 3-300 Carlson School of Management, 321 19th Avenue South, Minneapolis, MN 55455-0438
Phone: (612) 624-2500
Fax: (612) 624-8360
Web page: http://www.chrls.csom.umn.edu/
More information through EDIRC
trust game; trust; trustworthiness; reciprocity; commitment; communication. Comparative analysis of agency problems; Production of public goods;
Other versions of this item:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-01-02 (All new papers)
- NEP-CBE-2007-01-02 (Cognitive & Behavioural Economics)
- NEP-EVO-2007-01-02 (Evolutionary Economics)
- NEP-EXP-2007-01-02 (Experimental Economics)
- NEP-SOC-2007-01-02 (Social Norms & Social Capital)
- NEP-UPT-2007-01-02 (Utility Models & Prospect Theory)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Isaac, R Mark & Walker, James M, 1988. "Communication and Free-Riding Behavior: The Voluntary Contribution Mechanism," Economic Inquiry, Western Economic Association International, vol. 26(4), pages 585-608, October.
- Gary Charness & Martin Dufwenberg, 2006.
"Promises and Partnership,"
Econometric Society, vol. 74(6), pages 1579-1601, November.
- Avner Ben-Ner & Louis Putterman & Ting Ren, 2007. "Lavish Returns on Cheap Talk: Non-binding Communication in a Trust Experiment," Working Papers 2007-15, Brown University, Department of Economics.
- Bochet, Olivier & Page, Talbot & Putterman, Louis, 2006.
"Communication and punishment in voluntary contribution experiments,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 60(1), pages 11-26, May.
- Olivier Bochet & Talbot Page & Louis Putterman, 2005. "Communication and Punishment in Voluntary Contribution Experiments," Working Papers 2005-09, Brown University, Department of Economics.
- Oliver Bochet & Talbot Page & Louis Putterman, 2002. "Communication and Punishment in Voluntary Contribution Experiments," Working Papers 2002-29, Brown University, Department of Economics.
- J. Ochs & Alvin E. Roth, 1998.
"An experimental study of sequential bargaining,"
Levine's Working Paper Archive
331, David K. Levine.
- Sanchez-Pages, Santiago & Vorsatz, Marc, 2007.
"An experimental study of truth-telling in a sender-receiver game,"
Games and Economic Behavior,
Elsevier, vol. 61(1), pages 86-112, October.
- Santiago Sanchez-Pages & Marc Vorsatz, 2004. "An Experimental Study of Truth-Telling in a Sender-Receiver Game," ESE Discussion Papers 128, Edinburgh School of Economics, University of Edinburgh.
- Fischbacher, Urs & Gachter, Simon & Fehr, Ernst, 2001.
"Are people conditionally cooperative? Evidence from a public goods experiment,"
Elsevier, vol. 71(3), pages 397-404, June.
- Urs Fischbacher & Simon Gaechter & Ernst Fehr, . "Are People Conditionally Cooperative? Evidence from a Public Goods Experiment," IEW - Working Papers 016, Institute for Empirical Research in Economics - University of Zurich.
- Rigdon, Mary, 2005.
"Trust and reciprocity in incentive contracting,"
2007, University Library of Munich, Germany, revised 15 May 2006.
- Daniel Houser & Erte Xiao & Kevin McCabe & Vernon Smith, 2005.
"When Punishment Fails: Research on Sanctions, Intentions and Non- Cooperation,"
0502001, EconWPA, revised 18 Feb 2005.
- Houser, Daniel & Xiao, Erte & McCabe, Kevin & Smith, Vernon, 2008. "When punishment fails: Research on sanctions, intentions and non-cooperation," Games and Economic Behavior, Elsevier, vol. 62(2), pages 509-532, March.
- Daniel Houser & Erte Xiao & Kevin McCabe & Vernon Smith, 2005. "When punishment fails: Research on sanctions, intentions and non- cooperation," Experimental 0503001, EconWPA.
- Ben-Ner, Avner & Putterman, Louis, 2000. "On some implications of evolutionary psychology for the study of preferences and institutions," Journal of Economic Behavior & Organization, Elsevier, vol. 43(1), pages 91-99, September.
- Ernst Fehr & Simon G�chter, 2000.
"Fairness and Retaliation: The Economics of Reciprocity,"
Journal of Economic Perspectives,
American Economic Association, vol. 14(3), pages 159-181, Summer.
- Ernst Fehr & Simon Gaechter, 2000. "Fairness and Retaliation: The Economics of Reciprocity," CESifo Working Paper Series 336, CESifo Group Munich.
- Ernst Fehr & Simon Gaechter, . "Fairness and Retaliation: The Economics of Reciprocitys," IEW - Working Papers 040, Institute for Empirical Research in Economics - University of Zurich.
- Bohnet, Iris & Zeckhauser, Richard, 2003.
"Trust, Risk and Betrayal,"
Working Paper Series
rwp03-041, Harvard University, John F. Kennedy School of Government.
- Ariel Rubinstein, 2010.
"Perfect Equilibrium in a Bargaining Model,"
Levine's Working Paper Archive
661465000000000387, David K. Levine.
- Berg Joyce & Dickhaut John & McCabe Kevin, 1995. "Trust, Reciprocity, and Social History," Games and Economic Behavior, Elsevier, vol. 10(1), pages 122-142, July.
- Harvey James, 2002. "The Trust Paradox: A Survey of Economic Inquiries Into the Nature of Trust and Trustworthiness," Microeconomics 0202001, EconWPA.
- Hoffman, Elizabeth & McCabe, Kevin A & Smith, Vernon L, 1998. "Behavioral Foundations of Reciprocity: Experimental Economics and Evolutionary Psychology," Economic Inquiry, Western Economic Association International, vol. 36(3), pages 335-52, July.
- 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.
- Sloof, Randolph & Sonnemans, Joep & Oosterbeek, Hessel, 2004. "Specific investments, holdup, and the outside option principle," European Economic Review, Elsevier, vol. 48(6), pages 1399-1410, December.
- Cox, James C., 2004. "How to identify trust and reciprocity," Games and Economic Behavior, Elsevier, vol. 46(2), pages 260-281, February.
- Jeannette Brosig & Joachim Weimann & Axel Ockenfels, 2003.
"The Effect of Communication Media on Cooperation,"
German Economic Review,
Verein für Socialpolitik, vol. 4(2), pages 217-241, 05.
- McCabe, Kevin A. & Rigdon, Mary L. & Smith, Vernon L., 2003. "Positive reciprocity and intentions in trust games," Journal of Economic Behavior & Organization, Elsevier, vol. 52(2), pages 267-275, October.
- Buchan, Nancy R. & Johnson, Eric J. & Croson, Rachel T.A., 2006. "Let's get personal: An international examination of the influence of communication, culture and social distance on other regarding preferences," Journal of Economic Behavior & Organization, Elsevier, vol. 60(3), pages 373-398, July.
- Ernst Fehr & Bettina Rockenbach, 2003. "Detrimental effects of sanctions on human altruism," Microeconomics 0305007, EconWPA.
- Talbot Page & Louis Putterman & Bulent Unel, 2005.
"Voluntary Association in Public Goods Experiments: Reciprocity, Mimicry and Efficiency,"
Royal Economic Society, vol. 115(506), pages 1032-1053, October.
- Talbot Page & Louis Putterman & Bulent Unel, 2002. "Voluntary Association in Public Goods Experiments: Reciprocity, Mimicry and Efficiency," Working Papers 2002-19, Brown University, Department of Economics.
- Uri Gneezy, 2005. "Deception: The Role of Consequences," American Economic Review, American Economic Association, vol. 95(1), pages 384-394, March.
- James Jr., Harvey S., 2002. "The trust paradox: a survey of economic inquiries into the nature of trust and trustworthiness," Journal of Economic Behavior & Organization, Elsevier, vol. 47(3), pages 291-307, March.
- Rubinstein, Ariel, 1985. "A Bargaining Model with Incomplete Information about Time Preferences," Econometrica, Econometric Society, vol. 53(5), pages 1151-72, September.
- Frohlich, Norman & Oppenheimer, Joe, 1998. "Some consequences of e-mail vs. face-to-face communication in experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 35(3), pages 389-403, April.
- Brosig, Jeannette, 2002. "Identifying cooperative behavior: some experimental results in a prisoner's dilemma game," Journal of Economic Behavior & Organization, Elsevier, vol. 47(3), pages 275-290, March.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mary Helen Walker).
If references are entirely missing, you can add them using this form.