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Is Trust a Bad Investment?

  • Ashraf, Nava

    (Harvard U)

  • Bohnet, Iris

    (Harvard U)

  • Piankov, Nikita

    (Harvard U)

This paper examines whether trust is an investment decision under uncertainty, based on the expectation of trustworthiness, and whether trustworthiness is reciprocity, conditional on one's counterpart's behavior. In experiments run in Russia, South Africa and the United States, we find that only about one third of the subjects who trust expect to make money and that reciprocity matters in the United States but hardly in Russia and South Africa. On average, trust and trustworthiness behavior is significantly related to warm-glow kindness-with the exception of women's trust, which is almost exclusively accounted for by expectations of return. One-shot trust appears to "pay" for some but not for others. Key Words: Trust, kindness, reciprocity, gender, cross-cultural experiments.

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Paper provided by Harvard University, John F. Kennedy School of Government in its series Working Paper Series with number rwp03-047.

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Date of creation: Nov 2003
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Handle: RePEc:ecl:harjfk:rwp03-047
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