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Three-Player Trust Game With Insider Communication

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  • ROMAN M. SHEREMETA
  • JINGJING ZHANG

Abstract

type="main" xml:lang="en"> We examine behavior in a three-player trust game in which the first player may invest in the second and the second may invest in the third. Any amount sent from one player to the next is tripled. The third player decides the final allocation among three players. The baseline treatment with no communication shows that the first and second players send significant amounts and the third player reciprocates. Allowing insider communication between the second and the third players increases cooperation between these two. Interestingly, there is an external effect of insider communication: the first player who is outside communication sends 54% more and receives 289% more than in the baseline treatment. As a result, insider communication increases efficiency from 44% to 68%. (JEL C72, C91, D72)

Suggested Citation

  • Roman M. Sheremeta & Jingjing Zhang, 2014. "Three-Player Trust Game With Insider Communication," Economic Inquiry, Western Economic Association International, vol. 52(2), pages 576-591, April.
    • Handle: RePEc:bla:ecinqu:v:52:y:2014:i:2:p:576-591
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    File URL: http://hdl.handle.net/10.1111/ecin.12018
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    10. Bigoni, Maria & Bortolotti, Stefania & Casari, Marco & Gambetta, Diego, 2013. "It takes two to cheat: An experiment on derived trust," European Economic Review, Elsevier, vol. 64(C), pages 129-146.
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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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