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Trust and Cheating

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  • Jeffrey V. Butler
  • Paola Giuliano
  • Luigi Guiso

Abstract

When we take a cab we may feel cheated if the driver takes an unnecessarily long route despite the lack of a contract or promise to take the shortest possible path. Is our decision to take the cab affected by our belief that we may end up feeling cheated? Is the behavior of the driver affected by his beliefs about what we consider cheating? We address these questions in the context of a trust game by asking participants directly about their notions of cheating. We find that: i) both parties to a trust exchange have implicit notions of what constitutes cheating even in a context without promises or messages; ii) these notions are not unique – the vast majority of senders would feel cheated by a negative return on their trust/investment, whereas a sizable minority defines cheating according to an equal split rule; iii) these implicit notions affect the behavior of both sides to the exchange in terms of whether to trust or cheat and to what extent. Finally, we show that individual's notions of what constitutes cheating can be traced back to two classes of values instilled by parents: cooperative and competitive. The first class of values tends to soften the notion while the other tightens it.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18509.

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Date of creation: Nov 2012
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Handle: RePEc:nbr:nberwo:18509

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References

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  1. Ernst Fehr & Klaus M. Schmidt, . "A Theory of Fairness, Competition and Cooperation," IEW - Working Papers, Institute for Empirical Research in Economics - University of Zurich 004, Institute for Empirical Research in Economics - University of Zurich.
  2. Ernst Fehr, 2009. "On The Economics and Biology of Trust," Journal of the European Economic Association, MIT Press, MIT Press, vol. 7(2-3), pages 235-266, 04-05.
  3. Pierpaolo Battigalli & Martin Dufwenberg, 2007. "Guilt in Games," American Economic Review, American Economic Association, American Economic Association, vol. 97(2), pages 170-176, May.
  4. Marco Castillo & Ragan Petrie & Maximo Torero & Lise Vesterlund, 2011. "Gender Differences in Bar gaining Outcomes: A Field Experiment on Discrimination," Working Papers, George Mason University, Interdisciplinary Center for Economic Science 1029, George Mason University, Interdisciplinary Center for Economic Science.
  5. M. Rabin, 2001. "Incorporating Fairness into Game Theory and Economics," Levine's Working Paper Archive 511, David K. Levine.
  6. Roman Inderst & Marco Ottaviani, 2012. "Financial Advice," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 50(2), pages 494-512, June.
  7. Charness, Gary & Rabin, Matthew, 2002. "Understanding Social Preferences with Simple Tests," Department of Economics, Working Paper Series, Department of Economics, Institute for Business and Economic Research, UC Berkeley qt3d04q5sm, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  8. Bohnet, Iris & Zeckhauser, Richard, 2004. "Trust, risk and betrayal," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 55(4), pages 467-484, December.
  9. Glaeser, Edward Ludwig & Laibson, David I. & Scheinkman, Jose A. & Soutter, Christine L., 2000. "Measuring Trust," Scholarly Articles 4481497, Harvard University Department of Economics.
  10. Cox, James C., 2004. "How to identify trust and reciprocity," Games and Economic Behavior, Elsevier, Elsevier, vol. 46(2), pages 260-281, February.
  11. Eckel, Catherine C & Grossman, Philip J, 1998. "Are Women Less Selfish Than Men? Evidence from Dictator Experiments," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 108(448), pages 726-35, May.
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Cited by:
  1. Pierluigi Conzo, 2014. "Trust and Cheating in Sri Lanka: The Role of Experimentally-Induced Emotions about Tsunam," CSEF Working Papers, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy 355, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  2. Oriana Bandiera & Luigi Guiso & Andrea Prat & Raffaella Sadun, 2012. "What Do CEOs Do?," CEP Discussion Papers, Centre for Economic Performance, LSE dp1145, Centre for Economic Performance, LSE.
  3. Dessi, Roberta & Monin, Benoît, 2012. "Noblesse Oblige? Moral Identity and Prosocial Behavior in the Face of Selfishness," IDEI Working Papers, Institut d'Économie Industrielle (IDEI), Toulouse 750, Institut d'Économie Industrielle (IDEI), Toulouse.
  4. Luigi Guiso, 2012. "Trust & Insurance Markets," EIEF Working Papers Series 1207, Einaudi Institute for Economics and Finance (EIEF), revised Jul 2012.
  5. Dessi, Roberta & Monin, Benoît, 2012. "Noblesse Oblige? Moral Identity and Prosocial Behavior in the Face of Selfishness," TSE Working Papers, Toulouse School of Economics (TSE) 12-347, Toulouse School of Economics (TSE).
  6. Eleonora Patacchini & Edoardo Rainone, 2014. "The Word on Banking - Social Ties, Trust, and the Adoption of Financial Products," EIEF Working Papers Series 1404, Einaudi Institute for Economics and Finance (EIEF), revised Jul 2014.

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