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Trust Building Among Strangers

  • Teck-Hua Ho

    ()

    (Haas School of Business, University of California, Berkeley, California 94720)

  • Keith Weigelt

    ()

    (The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104)

The trust-building process is basic to social science. We investigate it in a laboratory setting using a novel multistage trust game where social gains are achieved if players trust each other in each stage. In each stage, also, players have an opportunity to appropriate these gains or be trustworthy by sharing them. Players are strangers because they do not know the identity of others and they will not play them again. Thus, there is no prospect of future interaction to induce trusting behavior, and we study the trust-building process where there is little scope for social relations and networks. Standard game theory, which assumes all players are opportunistic and untrustworthy and thus should have zero trust for others, is used to construct a null hypothesis. We test whether people are trusting or trustworthy and examine how inferring the intentions of those who trust affects trustworthiness. We also investigate the effect of stake on trust, and study the evolution of trust. Results show subjects exhibit some degree of trusting behavior, although a majority of them are not trustworthy and claim the entire social gain. Players are more reluctant to trust in later stages than in earlier ones and are more trustworthy if they are certain of the trustee's intention. Surprisingly, subjects are more trusting and trustworthy when the stake size increases. Finally, we find the subpopulation that invests in initiating the trust-building process modifies its trusting behavior based on the relative fitness of trust.

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File URL: http://dx.doi.org/10.1287/mnsc.1040.0350
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Article provided by INFORMS in its journal Management Science.

Volume (Year): 51 (2005)
Issue (Month): 4 (April)
Pages: 519-530

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Handle: RePEc:inm:ormnsc:v:51:y:2005:i:4:p:519-530
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  1. Teck-Hua Ho & Keith Weigelt, 1996. "Task Complexity, Equilibrium Selection, and Learning: An Experimental Study," Management Science, INFORMS, vol. 42(5), pages 659-679, May.
  2. Hoffman, Elizabeth & McCabe, Kevin & Smith, Vernon L, 1996. "Social Distance and Other-Regarding Behavior in Dictator Games," American Economic Review, American Economic Association, vol. 86(3), pages 653-60, June.
  3. 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 335-52, July.
  4. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard H, 1990. "Experimental Tests of the Endowment Effect and the Coase Theorem," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1325-48, December.
  5. Hoffman Elizabeth & McCabe Kevin & Shachat Keith & Smith Vernon, 1994. "Preferences, Property Rights, and Anonymity in Bargaining Games," Games and Economic Behavior, Elsevier, vol. 7(3), pages 346-380, November.
  6. Camerer, Colin & Weigelt, Keith, 1988. "Experimental Tests of a Sequential Equilibrium Reputation Model," Econometrica, Econometric Society, vol. 56(1), pages 1-36, January.
  7. Smith, Vernon L & Walker, James M, 1993. "Rewards, Experience and Decision Costs in First Price Auctions," Economic Inquiry, Western Economic Association International, vol. 31(2), pages 237-45, April.
  8. McKelvey, Richard D & Palfrey, Thomas R, 1992. "An Experimental Study of the Centipede Game," Econometrica, Econometric Society, vol. 60(4), pages 803-36, July.
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