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Introducing a Signaling Institution: An Experimental Investigation

Listed author(s):
  • Friedel Bolle
  • Jessica Kaehler

Trustworthiness can be conveyed by sending a costly signal in advance. In an experiment, we find that the smaller the percentage of trustworthy people in a group, the higher is their percentage of signaling. The introduction of signaling has strong distributional effects. It may be efficient because only under this institution can large-scale justified trust develop. In other circumstances, it may be (and in this investigation is only slightly) inefficient. The social product may be decreased, not only because of signaling costs but because of a lack of trust for people who, although trustworthy, are not ready to send the costly signal.

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Article provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.

Volume (Year): 163 (2007)
Issue (Month): 3 (September)
Pages: 428-447

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Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200709)163:3_428:iasiae_2.0.tx_2-m
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  1. Becker, Gary S, 1974. "A Theory of Social Interactions," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1063-1093, Nov.-Dec..
  2. Bohnet, Iris & Zeckhauser, Richard, 2004. "Trust, risk and betrayal," Journal of Economic Behavior & Organization, Elsevier, vol. 55(4), pages 467-484, December.
  3. Max Albert & Werner Güth & Erich Kirchler & Boris Maciejovsky, 2007. "Are we nice(r) to nice(r) people?—An experimental analysis," Experimental Economics, Springer;Economic Science Association, vol. 10(1), pages 53-69, March.
  4. Andreoni, James, 1990. "Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving?," Economic Journal, Royal Economic Society, vol. 100(401), pages 464-477, June.
  5. Friedel Bolle & Jessica Kaehler, 2006. "Coleman's Hypothesis on trusting behaviour and a remark on meta-studies," Journal of Economic Methodology, Taylor & Francis Journals, vol. 13(4), pages 469-483.
  6. Friedel Bolle, 1998. "Rewarding Trust: An Experimental Study," Theory and Decision, Springer, vol. 45(1), pages 83-98, August.
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