Will You Trust Me? Evidence from the Trust Game Between Groups of Friends and Strangers

We report the experimental results from a trust game that was played between friends and strangers. We invited subjects to the laboratory in groups of four friends, who were then assigned across different groups. Some groups of friends stayed together; others were mixed with strangers within their own group or in the opponent group; and some were in pairs of groups where everyone was a stranger to each other. Our results confirm the finding from the previous studies that a pair of friends is more willing to reciprocate a transfer from their friends than from a pair of strangers. We also show that trust and trustworthiness are undermined if the decision is made by a mixed group when compared to a group of friends who only have one friend in the other group. In general, our results suggest that the existence of between-group social ties is insufficient to build trust and trustworthiness. By revealing to a player that their co-player has a friend in the opponent, their group significantly increases trust but not trustworthiness. JEL Codes: C92, D90