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Commitment to the truth creates trust in market exchange: Experimental evidence

Author

Listed:
  • Nicolas Jacquemet

    (Paris School of Economics and U. Paris 1 Panthéon-Sorbonne)

  • Stéphane Luchini

    (Aix-Marseille U., CNRS, EHESS, Centrale Marseille, Aix-Marseille School of Economics)

  • Jason F. Shogren

    (Department of Economics, U. Wyoming)

  • Adam Zylbersztejn

    (Univ Lyon, Université Lyon 2, GATE UMR 5824, F-69130 Ecully, France; research fellow at Vistula University Warsaw (AFiBV), Warsaw, Poland)

Abstract

Social norms like the mutual belief in reciprocity facilitate economic exchange. But this reciprocity norm requires trust among traders, which can be challenging to create among strangers even with communication. The honesty oath is a time-honored mechanism that societies use to overcome this challenge – taking a solemn oath to tell the truth sends a trustworthy signal of real economic commitment given incomplete contracts. Herein we explore how the truth-telling oath creates trust within the sequential reciprocity trust game with pre-play, fixed-form, and cheap-talk communication. Four key results emerge: (1) communication under oath creates more trust and cooperative behavior; but (2) the oath induces a selection effect – it makes people more wary of using communication as a signal. (3) Although the overall net effect on cooperation is positive, the oath cannot reverse a general decay of cooperation over time. (4) By comparing the oath's performance to mild and deterrent fines for deception, we find that the oath is behaviorally equivalent to mild fines. The deterrent fine induces the highest level of cooperation.

Suggested Citation

  • Nicolas Jacquemet & Stéphane Luchini & Jason F. Shogren & Adam Zylbersztejn, 2023. "Commitment to the truth creates trust in market exchange: Experimental evidence," Working Papers 2311, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    • Handle: RePEc:gat:wpaper:2311
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    File URL: https://www.gate.cnrs.fr/RePEc/2023/2311.pdf
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    Cited by:

    1. Sorravich Kingsuwankul & Chloe Tergiman & Marie Claire Villeval, 2023. "Why do oaths work? Image concerns and credibility in promise keeping," Working Papers hal-04209489, HAL.

    More about this item

    Keywords

    Trust game; cooperation; communication; commitment; deception; fine; oath;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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