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Introducing a Signaling Institution: An Experimental Investigation

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  • Friedel Bolle
  • Jessica Kaehler

Abstract

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.

Suggested Citation

  • Friedel Bolle & Jessica Kaehler, 2007. "Introducing a Signaling Institution: An Experimental Investigation," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 163(3), pages 428-447, September.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200709)163:3_428:iasiae_2.0.tx_2-m
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    References listed on IDEAS

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    3. 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.
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    Cited by:

    1. Fehrler, Sebastian & Przepiorka, Wojtek, 2016. "Choosing a partner for social exchange: Charitable giving as a signal of trustworthiness," Journal of Economic Behavior & Organization, Elsevier, vol. 129(C), pages 157-171.

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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

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