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Trust, Reciprocity, And Rules

Author

Listed:
  • Thomas A. Rietz
  • Eric Schniter
  • Roman M. Sheremeta
  • Timothy W. Shields

Abstract

Many economic interactions rely on trust and trust violations can have serious economic consequences. Simple minimum standard rules are attractive because they prevent egregious trust violations. However, they may undermine more trusting and reciprocal (trustworthy) behavior that otherwise would have occurred, leading to worse outcomes. In an experimental trust game, we test the efficacy of exogenously imposed minimum standard rules. Rules damage trust and reciprocity, reducing economic welfare. While sufficiently restrictive rules restore welfare, trust and reciprocity never return. Results indicate that participants are concerned about payoffs while also using the game to learn about trust and trustworthiness of others. (JEL C72, C90, D63, D64, L51)

Suggested Citation

  • Thomas A. Rietz & Eric Schniter & Roman M. Sheremeta & Timothy W. Shields, 2018. "Trust, Reciprocity, And Rules," Economic Inquiry, Western Economic Association International, vol. 56(3), pages 1526-1542, July.
  • Handle: RePEc:bla:ecinqu:v:56:y:2018:i:3:p:1526-1542
    DOI: 10.1111/ecin.12512
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    Cited by:

    1. Erik O. Kimbrough & Alexander Vostroknutov, 2016. "Norms Make Preferences Social," Journal of the European Economic Association, European Economic Association, vol. 14(3), pages 608-638, June.
    2. Schniter, Eric & Sheremeta, Roman & Shields, Timothy, 2015. "The Problem with All-or-nothing Trust Games: What Others Choose Not to Do Matters In Trust-based Exchange," MPRA Paper 68561, University Library of Munich, Germany.
    3. Jared Rubin & Anya Samek & Roman M. Sheremeta, 2018. "Loss aversion and the quantity–quality tradeoff," Experimental Economics, Springer;Economic Science Association, vol. 21(2), pages 292-315, June.
    4. Eric Schniter & Timothy Shields, 2013. "Recalibrational Emotions and the Regulation of Trust-Based Behaviors," Working Papers 13-16, Chapman University, Economic Science Institute.
    5. Eric Schniter & Roman M. Sheremeta & Timothy W. Shields, 2013. "Limitations to Signaling Trust with All or Nothing Investments," Working Papers 13-24, Chapman University, Economic Science Institute.
    6. Jared Rubin & Anya Samek & Roman M. Sheremeta, 2016. "Incentivizing Quantity and Quality of Output: An Experimental Investigation of the Quantity-Quality Trade-off," Working Papers 16-01, Chapman University, Economic Science Institute.

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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
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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