IDEAS home Printed from https://ideas.repec.org/p/chu/wpaper/12-19.html
   My bibliography  Save this paper

Building and Rebuilding Trust with Promises and Apologies

Author

Listed:
  • Eric Schniter

    (Economic Science Institute, Chapman University)

  • Roman M. Sheremeta

    (Argyros School of Business and Economics, Chapman University)

  • Daniel Sznycer

    (Center for Evolutionary Psychology, University of California, Santa Barbara)

Abstract

Using trust games, we study how promises and messages are used to build new trust where it did not previously exist and to rebuild damaged trust. In these games, trustees made non-binding promises of investment-contingent returns, then investors decided whether to invest, and finally trustees decided how much to return. After an unexpected second game was announced, but before it commenced, trustees could send a one-way message. This design allowed us to observe the endogenous emergence and natural distribution of trust-relevant behaviors and focus on naturally occurring remedial strategies used by promise-breakers and distrusted trustees, their effects on investors, and subsequent outcomes. In the first game 16.6% of trustees were distrusted and 18.8% of trusted trustees broke promises. Trustees distrusted in the first game used long messages and promises closer to equal splits to encourage trust in the second game. To restore damaged trust, promise-breakers used apologies and upgraded promises. On average, investments in each game paid off for investors and trustees, suggesting that effective use of cheap signals fosters profitable trust-based exchange in these economies.

Suggested Citation

  • Eric Schniter & Roman M. Sheremeta & Daniel Sznycer, 2012. "Building and Rebuilding Trust with Promises and Apologies," Working Papers 12-19, Chapman University, Economic Science Institute.
  • Handle: RePEc:chu:wpaper:12-19
    as

    Download full text from publisher

    File URL: http://www.chapman.edu/research-and-institutions/economic-science-institute/_files/WorkingPapers/schniter-sheremeta-building-rebuilding-trust.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Charness, Gary & Dufwenberg, Martin, 2003. "Promises & Partnership," Research Papers in Economics 2003:3, Stockholm University, Department of Economics.
    2. David Masclet & Charles Noussair & Steven Tucker & Marie-Claire Villeval, 2003. "Monetary and Nonmonetary Punishment in the Voluntary Contributions Mechanism," American Economic Review, American Economic Association, vol. 93(1), pages 366-380, March.
    3. Joseph Farrell & Matthew Rabin, 1996. "Cheap Talk," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 103-118, Summer.
    4. Tore Ellingsen & Magnus Johannesson, 2004. "Promises, Threats and Fairness," Economic Journal, Royal Economic Society, vol. 114(495), pages 397-420, April.
    5. John Duffy & Nick Feltovich, 2006. "Words, Deeds, and Lies: Strategic Behaviour in Games with Multiple Signals," Review of Economic Studies, Oxford University Press, vol. 73(3), pages 669-688.
    6. Daniel Balliet, 2010. "Communication and Cooperation in Social Dilemmas: A Meta-Analytic Review," Journal of Conflict Resolution, Peace Science Society (International), vol. 54(1), pages 39-57, February.
    7. Vesna Prasnikar & Alvin E. Roth, 1992. "Considerations of Fairness and Strategy: Experimental Data from Sequential Games," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 865-888.
    8. 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.
    9. John R. Carter & Michael D. Irons, 1991. "Are Economists Different, and If So, Why?," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 171-177, Spring.
    10. Johnson, Noel D. & Mislin, Alexandra A., 2011. "Trust games: A meta-analysis," Journal of Economic Psychology, Elsevier, vol. 32(5), pages 865-889.
    11. Fischbacher, Urs & Utikal, Verena, 2013. "On the acceptance of apologies," Games and Economic Behavior, Elsevier, vol. 82(C), pages 592-608.
    12. Bracht, Juergen & Feltovich, Nick, 2009. "Whatever you say, your reputation precedes you: Observation and cheap talk in the trust game," Journal of Public Economics, Elsevier, vol. 93(9-10), pages 1036-1044, October.
    13. Gary Charness & Martin Dufwenberg, 2006. "Promises and Partnership," Econometrica, Econometric Society, vol. 74(6), pages 1579-1601, November.
    14. Jack Hirshleifer, 1984. "On the Emotions as Guarantors of Threats and Promises," UCLA Economics Working Papers 337, UCLA Department of Economics.
    15. Buchan, Nancy R. & Johnson, Eric J. & Croson, Rachel T.A., 2006. "Let's get personal: An international examination of the influence of communication, culture and social distance on other regarding preferences," Journal of Economic Behavior & Organization, Elsevier, vol. 60(3), pages 373-398, July.
    16. Gibson, Kevin & Bottom, William & Murnighan, J. Keith, 1999. "Once Bitten: Defection And Reconciliation In A Cooperative Enterprise," Business Ethics Quarterly, Cambridge University Press, vol. 9(1), pages 69-85, January.
    17. Kim, Peter H. & Dirks, Kurt T. & Cooper, Cecily D. & Ferrin, Donald L., 2006. "When more blame is better than less: The implications of internal vs. external attributions for the repair of trust after a competence- vs. integrity-based trust violation," Organizational Behavior and Human Decision Processes, Elsevier, vol. 99(1), pages 49-65, January.
    18. Nakayachi, Kazuya & Watabe, Motoki, 2005. "Restoring trustworthiness after adverse events: The signaling effects of voluntary "Hostage Posting" on trust," Organizational Behavior and Human Decision Processes, Elsevier, vol. 97(1), pages 1-17, May.
    19. Bohnet, Iris & Frey, Bruno S., 1999. "The sound of silence in prisoner's dilemma and dictator games," Journal of Economic Behavior & Organization, Elsevier, vol. 38(1), pages 43-57, January.
    20. Hoffman, Elizabeth & McCabe, Kevin & Smith, Vernon L, 1996. "Social Distance and Other-Regarding Behavior in Dictator Games," American Economic Review, American Economic Association, vol. 86(3), pages 653-660, June.
    21. Daniel Houser & Erte Xiao, 2011. "Classification of natural language messages using a coordination game," Experimental Economics, Springer;Economic Science Association, vol. 14(1), pages 1-14, March.
    22. Berg Joyce & Dickhaut John & McCabe Kevin, 1995. "Trust, Reciprocity, and Social History," Games and Economic Behavior, Elsevier, vol. 10(1), pages 122-142, July.
    23. De Cremer, David & van Dijk, Eric & Pillutla, Madan M., 2010. "Explaining Unfair Offers in Ultimatum Games and their Effects on Trust: An Experimental Approach," Business Ethics Quarterly, Cambridge University Press, vol. 20(1), pages 107-126, January.
    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. Johnsen, Åshild A & Kvaløy, Ola, 2014. "You always meet twice: An experiment on intrinsic versus instrumental reciprocity," UiS Working Papers in Economics and Finance 2014/2, University of Stavanger.
    2. Jingnan Chen & Daniel Houser, 2017. "Promises and lies: can observers detect deception in written messages," Experimental Economics, Springer;Economic Science Association, vol. 20(2), pages 396-419, June.
    3. Schniter, Eric & Sheremeta, Roman & Shields, Timothy, 2015. "The Problem with All-or-nothing Trust Games: What Others Choose Not to Do Matters In Trust-based Exchange," MPRA Paper 68561, University Library of Munich, Germany.
    4. Eric Schniter & Roman M. Sheremeta, 2014. "Predictable and Predictive Emotions: Explaining Cheap Signals and Trust Re-Extension," Working Papers 14-07, Chapman University, Economic Science Institute.
    5. Schniter, E. & Shields, T.W. & Sznycer, D., 2020. "Trust in humans and robots: Economically similar but emotionally different," Journal of Economic Psychology, Elsevier, vol. 78(C).
    6. Eric Schniter & Roman M. Sheremeta & Timothy W. Shields, 2013. "Limitations to Signaling Trust with All or Nothing Investments," Working Papers 13-24, Chapman University, Economic Science Institute.
    7. Roman M. Sheremeta, 2013. "Overbidding And Heterogeneous Behavior In Contest Experiments," Journal of Economic Surveys, Wiley Blackwell, vol. 27(3), pages 491-514, July.
    8. Sheremeta, Roman & Smith, Vernon, 2017. "The Impact of the Reformation on the Economic Development of Western Europe," MPRA Paper 87220, University Library of Munich, Germany.
    9. Bursian, Dirk & Faia, Ester, 2018. "Trust in the monetary authority," Journal of Monetary Economics, Elsevier, vol. 98(C), pages 66-79.
    10. Verena Utikal, 2013. "I am sorry - Honest and Fake Apologies," Working Paper Series of the Department of Economics, University of Konstanz 2013-18, Department of Economics, University of Konstanz.
    11. Eisenkopf, Gerald & Nüesch, Stephan, 2017. "Trust in third parties," Journal of Economic Behavior & Organization, Elsevier, vol. 137(C), pages 410-427.
    12. Yin, H., 2014. "Organizational architecture and pro-social behavior : Three essays," Other publications TiSEM d9fb03b9-cf92-4667-bd94-6, Tilburg University, School of Economics and Management.
    13. Daryl Koehn & Maria Goranova, 2018. "Do Investors See Value in Ethically Sound CEO Apologies? Investigating Stock Market Reaction to CEO Apologies," Journal of Business Ethics, Springer, vol. 152(2), pages 311-322, October.
    14. Kimbrough, Erik O. & Rubin, Jared & Sheremeta, Roman M. & Shields, Timothy W., 2015. "Commitment problems in conflict resolution," Journal of Economic Behavior & Organization, Elsevier, vol. 112(C), pages 33-45.
    15. Schniter, Eric & Sheremeta, Roman M. & Shields, Timothy W., 2015. "Conflicted emotions following trust-based interaction," Journal of Economic Psychology, Elsevier, vol. 51(C), pages 48-65.
    16. Elias L Khalil & Nick Feltovich, 2018. "Moral licensing, instrumental apology and insincerity aversion: Taking Immanuel Kant to the lab," PLOS ONE, Public Library of Science, vol. 13(11), pages 1-24, November.
    17. Dimitry Rtischev, 2016. "Evolution of Mindsight and Psychological Commitment among Strategically Interacting Agents," Games, MDPI, Open Access Journal, vol. 7(3), pages 1-16, September.
    18. 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.
    19. McCarter, Matthew & Sheremeta, Roman, 2013. "You Can’t Put Old Wine in New Bottles: The Effect of Newcomers on Coordination in Groups," MPRA Paper 43532, University Library of Munich, Germany.
    20. Johnsen, Åshild A. & Kvaløy, Ola, 2016. "Does strategic kindness crowd out prosocial behavior?," Journal of Economic Behavior & Organization, Elsevier, vol. 132(PA), pages 1-11.
    21. 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.
    22. Jeffrey S. Harrison & Andrew C. Wicks, 2021. "Harmful Stakeholder Strategies," Journal of Business Ethics, Springer, vol. 169(3), pages 405-419, March.
    23. Gambetta, Diego & Székely, Áron, 2014. "Signs and (counter)signals of trustworthiness," Journal of Economic Behavior & Organization, Elsevier, vol. 106(C), pages 281-297.
    24. Jacob LaRiviere & Matthew McMahon & William Neilson, 2018. "Shareholder Protection and Agency Costs: An Experimental Analysis," Management Science, INFORMS, vol. 64(7), pages 3108-3128, July.
    25. Åshild A. Johnsen & Ola Kvaløy, 2014. "Does Instrumental Reciprocity Crowd out Prosocial Behavior?," CESifo Working Paper Series 5078, CESifo.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Zakaria Babutsidze & Nobuyuki Hanaki & Adam Zylbersztejn, 2020. "Nonverbal content and swift trust: An experiment on digital communication," Working Papers 2008, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    2. Zakaria Babutsidze & Nobuyuki Hanaki & Adam Zylbersztejn, 2019. "Digital Communication and Swift Trust," Post-Print halshs-02409314, HAL.
    3. Zakaria Babutsidze & Nobuyuki Hanaki & Adam Zylbersztejn, 2021. "Nonverbal content and trust: An experiment on digital communication," ISER Discussion Paper 1128, Institute of Social and Economic Research, Osaka University.
    4. Eric Schniter & Roman M. Sheremeta & Daniel Sznycer, 2011. "Restoring Damaged Trust with Promises, Atonement and Apology," Working Papers 11-18, Chapman University, Economic Science Institute.
    5. Eric Schniter & Roman M. Sheremeta, 2014. "Predictable and Predictive Emotions: Explaining Cheap Signals and Trust Re-Extension," Working Papers 14-07, Chapman University, Economic Science Institute.
    6. Lei, Vivian & Masclet, David & Vesely, Filip, 2014. "Competition vs. communication: An experimental study on restoring trust," Journal of Economic Behavior & Organization, Elsevier, vol. 108(C), pages 94-107.
    7. Serra Garcia, M. & van Damme, E.E.C. & Potters, J.J.M., 2010. "Which Words Bond? An Experiment on Signaling in a Public Good Game (replaced by CentER DP 2011-139)," Discussion Paper 2010-33, Tilburg University, Center for Economic Research.
    8. Martin Brown & Jan Schmitz & Christian Zehnder, 2018. "Communication, Credit Provision and Loan Repayment: Evidence from a Person-to-Person Lending Experiment," Working Papers on Finance 1819, University of St. Gallen, School of Finance, revised Aug 2020.
    9. Fehr, Dietmar & Sutter, Matthias, 2019. "Gossip and the efficiency of interactions," Games and Economic Behavior, Elsevier, vol. 113(C), pages 448-460.
    10. Jingnan Chen & Daniel Houser, 2017. "Promises and lies: can observers detect deception in written messages," Experimental Economics, Springer;Economic Science Association, vol. 20(2), pages 396-419, June.
    11. Serra Garcia, M. & van Damme, E.E.C. & Potters, J.J.M., 2010. "Which Words Bond? An Experiment on Signaling in a Public Good Game (replaced by TILEC DP 2011-055)," Other publications TiSEM 5ed24dc3-e6cf-4fa4-bace-2, Tilburg University, School of Economics and Management.
    12. Serra Garcia, M. & van Damme, E.E.C. & Potters, J.J.M., 2011. "Lying About What you Know or About What you do? (replaces TILEC DP 2010-016)," Other publications TiSEM 09940b68-7bfa-44a7-bc4e-b, Tilburg University, School of Economics and Management.
    13. Murnighan, J. Keith & Wang, Long, 2016. "The social world as an experimental game," Organizational Behavior and Human Decision Processes, Elsevier, vol. 136(C), pages 80-94.
    14. Serra Garcia, M. & van Damme, E.E.C. & Potters, J.J.M., 2011. "Lying About What you Know or About What you Do? (replaces CentER DP 2010-033)," Discussion Paper 2011-139, Tilburg University, Center for Economic Research.
    15. Xiao, Erte, 2017. "Justification and conformity," Journal of Economic Behavior & Organization, Elsevier, vol. 136(C), pages 15-28.
    16. Koukoumelis, Anastasios & Levati, M. Vittoria & Weisser, Johannes, 2012. "Leading by words: A voluntary contribution experiment with one-way communication," Journal of Economic Behavior & Organization, Elsevier, vol. 81(2), pages 379-390.
    17. Zultan, Ro’i, 2012. "Strategic and social pre-play communication in the ultimatum game," Journal of Economic Psychology, Elsevier, vol. 33(3), pages 425-434.
    18. Brosig-Koch, Jeannette & Heinrich, Timo, 2018. "The role of communication content and reputation in the choice of transaction partners," Games and Economic Behavior, Elsevier, vol. 112(C), pages 49-66.
    19. Luigi Mittone & Andrew Musau, 2016. "Communication, sequentiality and strategic power. A prisoners� dilemma experiment," CEEL Working Papers 1603, Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia.
    20. Dirks, Kurt T. & Kim, Peter H. & Ferrin, Donald L. & Cooper, Cecily D., 2011. "Understanding the effects of substantive responses on trust following a transgression," Organizational Behavior and Human Decision Processes, Elsevier, vol. 114(2), pages 87-103, March.

    More about this item

    Keywords

    promise; atonement; apology; cheap talk; cheap signals; trust game; trust building; remedial strategies; reciprocity; experiments;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    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:chu:wpaper:12-19. 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: . General contact details of provider: https://edirc.repec.org/data/esichus.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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Megan Luetje (email available below). General contact details of provider: https://edirc.repec.org/data/esichus.html .

    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.