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Distinguishing trust from risk: An anatomy of the investment game

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  • Houser, Daniel
  • Schunk, Daniel
  • Winter, Joachim

Abstract

The role of trust in promoting economic activity and societal development has received considerable academic attention by social scientists. A popular way to measure trust at the individual level is the so-called \"investment game\" (Berg et al., 1995). It has been widely noted, however, that risk attitudes can also affect decisions in this game, and thus in principle confound inferences about trust. We provide novel evidence shedding light on the role of risk attitudes for trusting decisions. To the best of our knowledge our data are the first rigorous evidence that (i) aggregate investment distributions differ significantly between trust and risk environments, and (ii) risk attitudes predict individual investment decisions in risk games but not in the corresponding trust games. Our results are convergent evidence that trust decisions are not tightly connected to a person’s risk attitudes, and they lend support to the \"trust\" interpretation of decisions in investment games.

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Bibliographic Info

Paper provided by University of Munich, Department of Economics in its series Munich Reprints in Economics with number 19378.

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Date of creation: 2010
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Publication status: Published in Journal of Economic Behavior and Organization 1-2 74(2010): pp. 72-81
Handle: RePEc:lmu:muenar:19378

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  1. Ernst Fehr & Urs Fischbacher & Bernhard von Rosenbladt & Jürgen Schupp & Gert G. Wagner, 2002. "A Nation-Wide Laboratory: Examining Trust and Trustworthiness by Integrating Behavioral Experiments into Representative Surveys," Discussion Papers of DIW Berlin 319, DIW Berlin, German Institute for Economic Research.
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