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Trust and Reciprocity in the Investment Game with Indirect Reward

Author

Listed:
  • Werner G³th

    (Max Planck Institute for Research into Economic Systems, Strategic Interaction Unit, Jena, Germany)

  • Manfred K÷nigstein

    (Humboldt University at Berlin, Institute for Economic Theory III, Berlin, Germany)

  • NadÞge Marchand

    (CIRANO - Center for Interuniversity Research and Analysis on Organizations, MontrÚal, QuÚbec, Canada)

  • Klaus Nehring

    (Dept. of Economics, University of California, Davis, One Shields Avenue, CA, USA)

Abstract

Experimental studies have shown that trust and reciprocity are effective in increasing efficiency when complete contracting is infeasible. One example is the study by Berg et al. (1995) of the investment game. In this game the person who receives the investment is the one who may reward the investor. This is a direct reward game. Similar to Dufwenberg et al. (2001) we investigate to what extent trust and reward are still observable when reward is indirect; i.e., when the investor may only be rewarded by a third person who did receive his investment. Furthermore, we investigate the influence of social comparison (information about other players' investments) Our main finding is that indirect reward significantly reduces mutual cooperation.

Suggested Citation

  • Werner G³th & Manfred K÷nigstein & NadÞge Marchand & Klaus Nehring, 2001. "Trust and Reciprocity in the Investment Game with Indirect Reward," Homo Oeconomicus, Institute of SocioEconomics, vol. 18, pages 241-262.
    • Handle: RePEc:hom:homoec:v:18:y:2001:p:241-262
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