Trust, communication and contracts: An experiment
In the one-shot trust or investment game without opportunities for reputation formation or contracting, economic theory predicts no trusting because there is no incentive for trustworthiness. Under these conditions, theory predicts (a) no effect of pre-play communication, and (b) universal preference for moderate cost binding contracts over interacting without contracts. We introduce the opportunities to engage in pre-play communication and to enter binding or non-binding contracts, and find (a) communication increases trusting and trustworthiness, (b) contracts are largely unnecessary for trusting and trustworthy behaviors and are eschewed by many players, (c) more trusting leads to higher earnings, and (d) both trustors and trustees favor "fair and efficient" proposals over the more unequal proposals predicted by theory.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ernst Fehr & Simon Gaechter, "undated".
"Fairness and Retaliation: The Economics of Reciprocitys,"
IEW - Working Papers
040, Institute for Empirical Research in Economics - University of Zurich.
- Ernst Fehr & Simon Gächter, 2000. "Fairness and Retaliation: The Economics of Reciprocity," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 159-181, Summer.
- Ernst Fehr & Simon Gaechter, 2000. "Fairness and Retaliation: The Economics of Reciprocity," CESifo Working Paper Series 336, CESifo Group Munich.
- Hoffman, Elizabeth & McCabe, Kevin A & Smith, Vernon L, 1998. "Behavioral Foundations of Reciprocity: Experimental Economics and Evolutionary Psychology," Economic Inquiry, Western Economic Association International, vol. 36(3), pages 335-352, July.
- Ariel Rubinstein, 2010.
"Perfect Equilibrium in a Bargaining Model,"
Levine's Working Paper Archive
252, David K. Levine.
- Jeannette Brosig & Axel Ockenfels & Joachim Weimann, 2002.
"The Effect of Communication Media on Cooperation,"
Papers on Strategic Interaction
2002-17, Max Planck Institute of Economics, Strategic Interaction Group.
- Brosig, Jeannette, 2002. "Identifying cooperative behavior: some experimental results in a prisoner's dilemma game," Journal of Economic Behavior & Organization, Elsevier, vol. 47(3), pages 275-290, March.
- Bochet, Olivier & Page, Talbot & Putterman, Louis, 2006.
"Communication and punishment in voluntary contribution experiments,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 60(1), pages 11-26, May.
- Olivier Bochet & Talbot Page & Louis Putterman, 2005. "Communication and Punishment in Voluntary Contribution Experiments," Working Papers 2005-09, Brown University, Department of Economics.
- Oliver Bochet & Talbot Page & Louis Putterman, 2002. "Communication and Punishment in Voluntary Contribution Experiments," Working Papers 2002-29, Brown University, Department of Economics.
- Uri Gneezy, 2005. "Deception: The Role of Consequences," American Economic Review, American Economic Association, vol. 95(1), pages 384-394, March.
- Fischbacher, Urs & Gachter, Simon & Fehr, Ernst, 2001.
"Are people conditionally cooperative? Evidence from a public goods experiment,"
Elsevier, vol. 71(3), pages 397-404, June.
- Urs Fischbacher & Simon Gaechter & Ernst Fehr, "undated". "Are People Conditionally Cooperative? Evidence from a Public Goods Experiment," IEW - Working Papers 016, Institute for Empirical Research in Economics - University of Zurich.
- Sanchez-Pages, Santiago & Vorsatz, Marc, 2007.
"An experimental study of truth-telling in a sender-receiver game,"
Games and Economic Behavior,
Elsevier, vol. 61(1), pages 86-112, October.
- Santiago Sanchez-Pages & Marc Vorsatz, 2004. "An Experimental Study of Truth-Telling in a Sender-Receiver Game," ESE Discussion Papers 128, Edinburgh School of Economics, University of Edinburgh.
- Frohlich, Norman & Oppenheimer, Joe, 1998. "Some consequences of e-mail vs. face-to-face communication in experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 35(3), pages 389-403, April.
- Cox, James C., 2004. "How to identify trust and reciprocity," Games and Economic Behavior, Elsevier, vol. 46(2), pages 260-281, February.
- J. Ochs & Alvin E. Roth, 1998.
"An experimental study of sequential bargaining,"
Levine's Working Paper Archive
331, David K. Levine.
- Bohnet, Iris & Zeckhauser, Richard, 2003.
"Trust, Risk and Betrayal,"
Working Paper Series
rwp03-041, Harvard University, John F. Kennedy School of Government.
- Ben-Ner, Avner & Putterman, Louis, 2000. "On some implications of evolutionary psychology for the study of preferences and institutions," Journal of Economic Behavior & Organization, Elsevier, vol. 43(1), pages 91-99, September.
- Isaac, R Mark & Walker, James M, 1988. "Communication and Free-Riding Behavior: The Voluntary Contribution Mechanism," Economic Inquiry, Western Economic Association International, vol. 26(4), pages 585-608, October.
- Gary Charness & Martin Dufwenberg, 2006.
"Promises and Partnership,"
Econometric Society, vol. 74(6), pages 1579-1601, November.
- Harvey James, 2002. "The Trust Paradox: A Survey of Economic Inquiries Into the Nature of Trust and Trustworthiness," Microeconomics 0202001, EconWPA.
- Daniel Houser & Erte Xiao & Kevin McCabe & Vernon Smith, 2005.
"When punishment fails: Research on sanctions, intentions and non- cooperation,"
- Houser, Daniel & Xiao, Erte & McCabe, Kevin & Smith, Vernon, 2008. "When punishment fails: Research on sanctions, intentions and non-cooperation," Games and Economic Behavior, Elsevier, vol. 62(2), pages 509-532, March.
- Daniel Houser & Erte Xiao & Kevin McCabe & Vernon Smith, 2005. "When Punishment Fails: Research on Sanctions, Intentions and Non- Cooperation," Experimental 0502001, EconWPA, revised 18 Feb 2005.
- Sloof, Randolph & Sonnemans, Joep & Oosterbeek, Hessel, 2004. "Specific investments, holdup, and the outside option principle," European Economic Review, Elsevier, vol. 48(6), pages 1399-1410, December.
- Buchan, Nancy R. & Johnson, Eric J. & Croson, Rachel T.A., 2006. "Let's get personal: An international examination of the influence of communication, culture and social distance on other regarding preferences," Journal of Economic Behavior & Organization, Elsevier, vol. 60(3), pages 373-398, July.
- James Jr., Harvey S., 2002. "The trust paradox: a survey of economic inquiries into the nature of trust and trustworthiness," Journal of Economic Behavior & Organization, Elsevier, vol. 47(3), pages 291-307, March.
- Rigdon, Mary, 2005.
"Trust and reciprocity in incentive contracting,"
2007, University Library of Munich, Germany, revised 15 May 2006.
- Rubinstein, Ariel, 1985. "A Bargaining Model with Incomplete Information about Time Preferences," Econometrica, Econometric Society, vol. 53(5), pages 1151-1172, September.
- Talbot Page & Louis Putterman & Bulent Unel, 2002.
"Voluntary Association in Public Goods Experiments: Reciprocity, Mimicry and Efficiency,"
2002-19, Brown University, Department of Economics.
- Talbot Page & Louis Putterman & Bulent Unel, 2005. "Voluntary Association in Public Goods Experiments: Reciprocity, Mimicry and Efficiency," Economic Journal, Royal Economic Society, vol. 115(506), pages 1032-1053, October.
- Ernst Fehr & Bettina Rockenbach, 2003. "Detrimental effects of sanctions on human altruism," Microeconomics 0305007, EconWPA.
- McCabe, Kevin A. & Rigdon, Mary L. & Smith, Vernon L., 2003. "Positive reciprocity and intentions in trust games," Journal of Economic Behavior & Organization, Elsevier, vol. 52(2), pages 267-275, October.
- Avner Ben-Ner & Louis Putterman & Ting Ren, 2007. "Lavish Returns on Cheap Talk: Non-binding Communication in a Trust Experiment," Working Papers 2007-15, Brown University, Department of Economics.
- Eckel, Catherine C. & Wilson, Rick K., 2004. "Is trust a risky decision?," Journal of Economic Behavior & Organization, Elsevier, vol. 55(4), pages 447-465, December.
- Berg Joyce & Dickhaut John & McCabe Kevin, 1995. "Trust, Reciprocity, and Social History," Games and Economic Behavior, Elsevier, vol. 10(1), pages 122-142, July.
When requesting a correction, please mention this item's handle: RePEc:eee:jeborg:v:70:y:2009:i:1-2:p:106-121. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.