IDEAS home Printed from https://ideas.repec.org/a/eee/jobhdp/v114y2011i2p75-86.html
   My bibliography  Save this article

In money we trust? The use of financial compensations to repair trust in the aftermath of distributive harm

Author

Listed:
  • Desmet, Pieter T.M.
  • Cremer, David De
  • Dijk, Eric van

Abstract

Trust is vital yet vulnerable in economic exchange relations. In these relations, a widely used strategy in response to distributive harm consists of having the transgressor pay a financial compensation to the victim. This research examines whether financial compensations can increase trust towards a transgressor, and whether the size of the compensation is relevant to this process. We hypothesized and found that whether larger compensations will elicit more trust, depends on how clear the perpetrator's intention to transgress was. Experiment 1 revealed that trust perceptions increased more by a slight overcompensation of the inflicted harm as compared to an exact or a partial compensation, but not if the transgressor's bad intentions became clear through the use of deception in the violation. In Experiments 2 and 3, we replicated these findings and further showed that it is not the use of deception per se, but rather the attribution of bad intent that moderates the effect of compensation size. Experiment 4, using a trust game paradigm revealed that this effect not only occurs for small overcompensations, but also for larger overcompensations.

Suggested Citation

  • Desmet, Pieter T.M. & Cremer, David De & Dijk, Eric van, 2011. "In money we trust? The use of financial compensations to repair trust in the aftermath of distributive harm," Organizational Behavior and Human Decision Processes, Elsevier, vol. 114(2), pages 75-86, March.
  • Handle: RePEc:eee:jobhdp:v:114:y:2011:i:2:p:75-86
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0749-5978(10)00089-0
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Blount, Sally, 1995. "When Social Outcomes Aren't Fair: The Effect of Causal Attributions on Preferences," Organizational Behavior and Human Decision Processes, Elsevier, vol. 63(2), pages 131-144, August.
    2. Falk, Armin & Fehr, Ernst & Fischbacher, Urs, 2008. "Testing theories of fairness--Intentions matter," Games and Economic Behavior, Elsevier, vol. 62(1), pages 287-303, January.
    3. De Cremer, David & Van Kleef, Gerben A., 2009. "When being overpaid makes me feel good about myself: It depends on how the other feels," Journal of Economic Psychology, Elsevier, vol. 30(5), pages 793-802, October.
    4. 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.
    5. Cremer, David De & Knippenberg, Daan van, 2004. "Leader self-sacrifice and leadership effectiveness: The moderating role of leader self-confidence," Organizational Behavior and Human Decision Processes, Elsevier, vol. 95(2), pages 140-155, November.
    6. Webster, Cynthia & Sundaram, D. S., 1998. "Service consumption criticality in failure recovery," Journal of Business Research, Elsevier, vol. 41(2), pages 153-159, February.
    7. Schweitzer, Maurice E. & Hershey, John C. & Bradlow, Eric T., 2006. "Promises and lies: Restoring violated trust," Organizational Behavior and Human Decision Processes, Elsevier, vol. 101(1), pages 1-19, September.
    8. Pillutla, Madan M. & Murnighan, J. Keith, 1996. "Unfairness, Anger, and Spite: Emotional Rejections of Ultimatum Offers," Organizational Behavior and Human Decision Processes, Elsevier, vol. 68(3), pages 208-224, December.
    9. Kim, Peter H. & Dirks, Kurt T. & Cooper, Cecily D. & Ferrin, Donald L., 2006. "When more blame is better than less: The implications of internal vs. external attributions for the repair of trust after a competence- vs. integrity-based trust violation," Organizational Behavior and Human Decision Processes, Elsevier, vol. 99(1), pages 49-65, January.
    10. Matthew Rabin & Joel L. Schrag, 1999. "First Impressions Matter: A Model of Confirmatory Bias," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 37-82.
    11. Matthew Rabin, 1998. "Psychology and Economics," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 11-46, March.
    12. Colin F. Camerer & Richard H. Thaler, 1995. "Anomalies: Ultimatums, Dictators and Manners," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 209-219, Spring.
    13. Berg Joyce & Dickhaut John & McCabe Kevin, 1995. "Trust, Reciprocity, and Social History," Games and Economic Behavior, Elsevier, vol. 10(1), pages 122-142, July.
    14. De Cremer, David & van Dijk, Eric & Pillutla, Madan M., 2010. "Explaining Unfair Offers in Ultimatum Games and their Effects on Trust: An Experimental Approach," Business Ethics Quarterly, Cambridge University Press, vol. 20(01), pages 107-126, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kim, Peter H. & Cooper, Cecily D. & Dirks, Kurt T. & Ferrin, Donald L., 2013. "Repairing trust with individuals vs. groups," Organizational Behavior and Human Decision Processes, Elsevier, vol. 120(1), pages 1-14.
    2. Desmet, Pieter T.M. & Leunissen, Joost M., 2014. "How many pennies for your pain? Willingness to compensate as a function of expected future interaction and intentionality feedback," Journal of Economic Psychology, Elsevier, vol. 43(C), pages 105-113.
    3. Haesevoets, Tessa & Van Hiel, Alain & Reinders Folmer, Chris & De Cremer, David, 2014. "What money can’t buy: The psychology of financial overcompensation," Journal of Economic Psychology, Elsevier, vol. 42(C), pages 83-95.
    4. Leunissen, Joost M. & Cremer, David De & Reinders Folmer, Christopher P., 2012. "An instrumental perspective on apologizing in bargaining: The importance of forgiveness to apologize," Journal of Economic Psychology, Elsevier, vol. 33(1), pages 215-222.
    5. Lei, Vivian & Masclet, David & Vesely, Filip, 2014. "Competition vs. communication: An experimental study on restoring trust," Journal of Economic Behavior & Organization, Elsevier, vol. 108(C), pages 94-107.
    6. Haesevoets, Tessa & Reinders Folmer, Chris & De Cremer, David & Van Hiel, Alain, 2013. "Money isn’t all that matters: The use of financial compensation and apologies to preserve relationships in the aftermath of distributive harm," Journal of Economic Psychology, Elsevier, vol. 35(C), pages 95-107.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jobhdp:v:114:y:2011:i:2:p:75-86. 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). General contact details of provider: http://www.elsevier.com/locate/obhdp .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.