Through an experiment this study investigates the effects that verification has on honest traders. This paper demonstrates that by reducing the scope for trust verification can have a negative effect on the behaviour of honest individuals. Specifically, the analysis shows that trustworthy agents are willing to punish or seek compensation from those that deprive them of trust opportunities through the use of verification. Regulatory implications are discussed.
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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number
098.
Find related papers by JEL classification: C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General D18 - Microeconomics - - Household Behavior - - - Consumer Protection D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
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