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What you don’t know won’t hurt you: a laboratory analysis of betrayal aversion

  • Jason Aimone

    ()

  • Daniel Houser

    ()

Recent research argues “betrayal aversion” leads many people to avoid risk more when a person, rather than nature, determines the outcome of uncertainty. However, past studies indicate that factors unrelated to betrayal aversion, such as loss aversion, could contribute to differences between treatments. Using a novel experiment design to isolate betrayal aversion, one that varies how strategic uncertainty is resolved, we provide rigorous evidence supporting the detrimental impact of betrayal aversion. The impact is substantial: holding fixed the probability of betrayal, the possibility of knowing that one has been betrayed reduces investment by about one-third. We suggest emotion-regulation underlies these results and helps to explain the importance of impersonal, institution-mediated exchange in promoting economic efficiency. Copyright Economic Science Association 2012

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File URL: http://hdl.handle.net/10.1007/s10683-012-9314-z
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Article provided by Springer in its journal Experimental Economics.

Volume (Year): 15 (2012)
Issue (Month): 4 (December)
Pages: 571-588

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Handle: RePEc:kap:expeco:v:15:y:2012:i:4:p:571-588
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=102888

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