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Trust and financial trades: Lessons from an investment game where reciprocators can hide behind probabilities

Author

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  • Vranceanu, Radu
  • Sutan, Angela
  • Dubart, Delphine

Abstract

This paper shows that if a very small, exogenously given probability of terminating the exchange is introduced in an elementary investment game, more reciprocators will choose the defection strategy. Everything happens as if they “hide behind probabilities” in order to break the trust relationship. Investors do not alter their behavior in a significant way, at least not for a very small external risk. Financial assets all come with a predetermined and contractual probability that by the time when the buyer has to receive the reward for his investment, “bad luck” might have brought the asset value down to zero. In the light of the experimental findings, such trades would not provide a favorable environment for building trust.

Suggested Citation

  • Vranceanu, Radu & Sutan, Angela & Dubart, Delphine, 2012. "Trust and financial trades: Lessons from an investment game where reciprocators can hide behind probabilities," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 41(1), pages 72-78.
    • Handle: RePEc:eee:soceco:v:41:y:2012:i:1:p:72-78
    DOI: 10.1016/j.socec.2011.10.011
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    Cited by:

    1. Christophe Heintz & Jérémy Celse & Francesca Giardini & Sylvain Max, 2015. "Facing expectations: Those that we prefer to fulfil and those that we disregard," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 10(5), pages 442-455, September.
    2. Tagat, Anirudh & Kapoor, Hansika, 2017. "The trust broker game: A three-player trust game with probabilistic returns and information asymmetry," Economics Discussion Papers 2017-33, Kiel Institute for the World Economy (IfW Kiel).
    3. Khalmetski, Kiryl & Rockenbach, Bettina & Werner, Peter, 2017. "Evasive lying in strategic communication," Journal of Public Economics, Elsevier, vol. 156(C), pages 59-72.
    4. Sutan, Angela & Vranceanu, Radu, 2016. "Lying about delegation," Journal of Economic Behavior & Organization, Elsevier, vol. 121(C), pages 29-40.
    5. Jin, Shan & Yan, Sibo & Zhang, Xiaomeng, 2025. "Measuring trust across countries: Inconsistencies between experiments and surveys," Economics Letters, Elsevier, vol. 248(C).
    6. Besancenot, Damien & Vranceanu, Radu, 2011. "Banks' risk race: A signaling explanation," International Review of Economics & Finance, Elsevier, vol. 20(4), pages 784-791, October.
    7. Fooken, Jonas, 2023. "Trusting when risk and ambiguity create opportunities for exploitation," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 103(C).

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    Keywords

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    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G00 - Financial Economics - - General - - - General

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