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Incentivising trust

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Author Info
Pamela Lenton () (Department of Economics, The University of Sheffield)
Paul Mosley (Department of Economics, The University of Sheffield)

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Abstract

We argue that trust can be incentivised by measures which increase the ability of trusters to protect themselves against risk. We work within the framework originally established by Berg, Dickhaut and McCabe (1995) in which trust is measured experimentally as the ability to generate reciprocity in response to an initial offer of money within a two-person game. An incentive is conveyed both by means of variations in the multiplier applied to the first player’s initial offer and by giving the first player the opportunity to insure themselves against the possibility that the second player will fail to reciprocate their initial offer. Measured trust is strongly responsive to both these incentives. Thus third parties have the ability to influence the outcome of the game, not only, as in the analysis of Charness et al (2008), by punishing failure to reciprocate and rewarding ‘good’ initial offers, but also by offering protection which strengthens the first player’s risk efficacy, or ratio of assets to risk.

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File URL: http://shef.ac.uk/content/1/c6/09/50/48/SERP2009004.pdf
File Format: application/pdf
File Function: First version, 2009
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Publisher Info
Paper provided by The University of Sheffield, Department of Economics in its series Working Papers with number 2009004.

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Length: 21 pages
Date of creation: Mar 2009
Date of revision: Mar 2009
Handle: RePEc:shf:wpaper:2009004

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Related research
Keywords: Experimental economics; Game theory; Risk; Reciprocity;

Find related papers by JEL classification:
A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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This page was last updated on 2009-11-29.

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