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Intentions and Consequences An Experimental Investigation of Trust and Reciprocity Determinants

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Author Info

  • Werner Güth

    ()
    (Max Planck Institute of Economics, Strategic Interaction Group)

  • Harriet Mugera

    (School of Social Sciences, University of Trento, Italy)

  • Andrew Musau

    (School of Social Sciences, University of Trento, Italy; Faculty of Economics and Social Sciences, University of Agder, Norway)

  • Matteo Ploner

    (Cognitive and Experimental Economics Laboratory, University of Trento, Italy)

Abstract

We experimentally manipulate the efficiency of trust and reciprocity in a modified Investment Game. The aim of our manipulation is to test whether reciprocity is mainly affected by payoff consequences of trust or by intentions underlying it. We find that intentions matter and that consequences have an asymmetric impact: trustees reward trust more when trust is more efficient but do not adjust rewards to the efficiency of their own actions. As a result, profitability of trust is fostered by efficiency of trust as well as by efficiency of reciprocity. However, trustors do not fully exploit the high efficiency gains offered by investments and display only moderate trust.

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Bibliographic Info

Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2012-029.

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Date of creation: 20 Jun 2012
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Handle: RePEc:jrp:jrpwrp:2012-029

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Keywords: trust and reciprocity; other-regarding preference; experiment;

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  1. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory Of Fairness, Competition, And Cooperation," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 817-868, August.
  2. Johnson, Noel D. & Mislin, Alexandra A., 2011. "Trust games: A meta-analysis," Journal of Economic Psychology, Elsevier, vol. 32(5), pages 865-889.
  3. Matthew Rabin., 1992. "Incorporating Fairness into Game Theory and Economics," Economics Working Papers 92-199, University of California at Berkeley.
  4. La Porta, Rafael, et al, 1997. "Trust in Large Organizations," American Economic Review, American Economic Association, vol. 87(2), pages 333-38, May.
  5. 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.
  6. Daniel Houser & Daniel Schunk & Joachim Winter, 2009. "Distinguishing trust from risk: an anatomy of the investment game," IEW - Working Papers 450, Institute for Empirical Research in Economics - University of Zurich.
  7. 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.
  8. Harvey James, 2002. "The Trust Paradox: A Survey of Economic Inquiries Into the Nature of Trust and Trustworthiness," Microeconomics 0202001, EconWPA.
  9. Williamson, Oliver E, 1993. "Calculativeness, Trust, and Economic Organization," Journal of Law and Economics, University of Chicago Press, vol. 36(1), pages 453-86, April.
  10. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
  11. Jordi Brandts & Gary Charness, 2011. "The strategy versus the direct-response method: a first survey of experimental comparisons," Experimental Economics, Springer, vol. 14(3), pages 375-398, September.
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