IDEAS home Printed from https://ideas.repec.org/a/inm/ormnsc/v58y2012i1p141-158.html
   My bibliography  Save this article

Apologies as Signals: With Evidence from a Trust Game

Author

Listed:
  • Benjamin Ho

    () (Department of Economics, Vassar College, Poughkeepsie, New York 12604)

Abstract

Apologies are part of a social institution designed to restore frayed relationships not only in daily life but also in the domains of corporate governance, medical malpractice litigation, political reputation, organizational culture, etc. The theory shows that in a general class of moral hazard games with imperfect information about agents with two-dimensional type, apologies exhibit regular properties--e.g., apologies are more frequent in long relationships, early in relationships, and between better-matched partners. A variant of the trust game demonstrates that communication matters in a manner consistent with economic theory; specifically, the words "I am sorry" appear to select equilibrium behavior consistent with the theory's main predictions. This paper was accepted by Brad Barber, Teck Ho, and Terrance Odean, special issue editors.

Suggested Citation

  • Benjamin Ho, 2012. "Apologies as Signals: With Evidence from a Trust Game," Management Science, INFORMS, vol. 58(1), pages 141-158, January.
  • Handle: RePEc:inm:ormnsc:v:58:y:2012:i:1:p:141-158
    DOI: 10.1287/mnsc.1110.1410
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mnsc.1110.1410
    Download Restriction: no

    References listed on IDEAS

    as
    1. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory of Fairness, Competition, and Cooperation," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 817-868.
    2. Kreps, David M. & Milgrom, Paul & Roberts, John & Wilson, Robert, 1982. "Rational cooperation in the finitely repeated prisoners' dilemma," Journal of Economic Theory, Elsevier, vol. 27(2), pages 245-252, August.
    3. Gneezy, Uri & Guth, Werner & Verboven, Frank, 2000. "Presents or investments? An experimental analysis," Journal of Economic Psychology, Elsevier, vol. 21(5), pages 481-493, October.
    4. Sally, David, 2001. "On sympathy and games," Journal of Economic Behavior & Organization, Elsevier, vol. 44(1), pages 1-30, January.
    5. Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
    6. Vernon L. Smith, 2003. "Constructivist and Ecological Rationality in Economics," American Economic Review, American Economic Association, vol. 93(3), pages 465-508, June.
    7. Uri Gneezy, 2005. "Deception: The Role of Consequences," American Economic Review, American Economic Association, vol. 95(1), pages 384-394, March.
    8. Abeler, Johannes & Calaki, Juljana & Andree, Kai & Basek, Christoph, 2010. "The power of apology," Economics Letters, Elsevier, vol. 107(2), pages 233-235, May.
      • Johannes Abeler & Juljana Calaki & Kai Andree & Christoph Basek, 2009. "The Power of Apology," Discussion Papers 2009-12, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
      • Johannes Abeler & Juljana Calaki & Kai Andree & Christoph Basek, 2009. "The Power of Apology," Discussion Papers 2009-12, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    9. David Sally, 2002. "Two Economic Applications of Sympathy," Journal of Law, Economics, and Organization, Oxford University Press, vol. 18(2), pages 455-487, October.
    10. Jean Ensminger, 2000. "Experimental economics in the bush: why institutions matter," Chapters, in: Claude Ménard (ed.),Institutions, Contracts and Organizations, chapter 13, Edward Elgar Publishing.
    11. Cox, James C., 2004. "How to identify trust and reciprocity," Games and Economic Behavior, Elsevier, vol. 46(2), pages 260-281, February.
    12. Navin Kartik, 2009. "Strategic Communication with Lying Costs," Review of Economic Studies, Oxford University Press, vol. 76(4), pages 1359-1395.
    13. 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.
    14. Spence, Michael, 1974. "Competitive and optimal responses to signals: An analysis of efficiency and distribution," Journal of Economic Theory, Elsevier, vol. 7(3), pages 296-332, March.
    15. Benjamin Ho & Elaine Liu, 2011. "Does sorry work? The impact of apology laws on medical malpractice," Journal of Risk and Uncertainty, Springer, vol. 43(2), pages 141-167, October.
    16. Prendergast, Canice & Stole, Lars, 2001. "The non-monetary nature of gifts," European Economic Review, Elsevier, vol. 45(10), pages 1793-1810, December.
    17. Ananish Chaudhuri & Lata Gangadharan, 2007. "An Experimental Analysis of Trust and Trustworthiness," Southern Economic Journal, Southern Economic Association, vol. 73(4), pages 959-985, April.
    18. B. Douglas Bernheim & Antonio Rangel, 2004. "Addiction and Cue-Triggered Decision Processes," American Economic Review, American Economic Association, vol. 94(5), pages 1558-1590, December.
    19. Berg Joyce & Dickhaut John & McCabe Kevin, 1995. "Trust, Reciprocity, and Social History," Games and Economic Behavior, Elsevier, vol. 10(1), pages 122-142, July.
    20. Tiedens, Larissa Z., 2001. "Anger and Advancement versus Sadness and Subjugation: The Effect of Negative Emotion Expressions on Social Status Conferral," Research Papers 1615, Stanford University, Graduate School of Business.
    21. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
    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. Schniter, Eric & Sheremeta, Roman, 2014. "Predictable and Predictive Emotions: Explaining Cheap Signals and Trust Re-Extension," MPRA Paper 59665, University Library of Munich, Germany.
    2. Srivastava, Vatsalya, 2016. "The Sorry Clause," Other publications TiSEM 9340f3b1-ebf3-46b9-8ffd-3, Tilburg University, School of Economics and Management.
    3. Diego Gambetta & Wojtek Przepiorka, 2014. "Natural and Strategic Generosity as Signals of Trustworthiness," PLOS ONE, Public Library of Science, vol. 9(5), pages 1-9, May.
    4. Srivastava, Vatsalya, 2017. "The Sorry Clause (revision of CentER DP 2016-008)," Discussion Paper 2017-002, Tilburg University, Center for Economic Research.
    5. Fischbacher, Urs & Utikal, Verena, 2013. "On the acceptance of apologies," Games and Economic Behavior, Elsevier, vol. 82(C), pages 592-608.
    6. Basil Halperin & Benjamin Ho & John List & Ian Muir, 2018. "Toward an understanding of the economics of apologies: evidence from a large-scale natural field experiment," Natural Field Experiments 00644, The Field Experiments Website.
    7. Srivastava, Vatsalya, 2017. "The Sorry Clause (Revision of TILEC DP 2016-004)," Discussion Paper 2017-002, Tilburg University, Tilburg Law and Economic Center.
    8. Srivastava, Vatsalya, 2016. "The Sorry Clause," Discussion Paper 2016-008, Tilburg University, Center for Economic Research.
    9. Verena Utikal, 2013. "I am sorry - Honest and fake apologies," TWI Research Paper Series 81, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
    10. Srivastava, Vatsalya, 2016. "The Sorry Clause," Other publications TiSEM 51d65f16-812c-4fbd-9cd2-f, Tilburg University, School of Economics and Management.
    11. Marie Racine & Craig Wilson & Michael Wynes, 2020. "The Value of Apology: How do Corporate Apologies Moderate the Stock Market Reaction to Non-Financial Corporate Crises?," Journal of Business Ethics, Springer, vol. 163(3), pages 485-505, May.
    12. Cailin O'Connor, 2019. "Methods, Models, and the Evolution of Moral Psychology," Papers 1909.09198, arXiv.org.
    13. Ben Gilbert & Alexander James & Jason F. Shogren, 2018. "Corporate apology for environmental damage," Journal of Risk and Uncertainty, Springer, vol. 56(1), pages 51-81, February.
    14. Srivastava, Vatsalya, 2017. "The Sorry Clause (Revision of TILEC DP 2016-004)," Other publications TiSEM 5925920e-05c6-4ae0-8e76-d, Tilburg University, School of Economics and Management.
    15. Srivastava, Vatsalya, 2017. "The Sorry Clause (revision of CentER DP 2016-008)," Other publications TiSEM 252e9410-4c9f-4a40-9ab7-a, Tilburg University, School of Economics and Management.
    16. Srivastava, Vatsalya, 2016. "The Sorry Clause," Discussion Paper 2016-004, Tilburg University, Tilburg Law and Economic Center.

    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:inm:ormnsc:v:58:y:2012:i:1:p:141-158. 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: (Matthew Walls). General contact details of provider: http://edirc.repec.org/data/inforea.html .

    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.