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Trust, Information Acquisition and Financial Decisions: A Field Experiment

  • Sonia Di Giannatale

    ()

    (Centro de Investigación y Docencia Económicas)

  • Alexander Elbittar

    ()

    (Centro de Investigación y Docencia Económicas)

  • Patricia López Rodriguez

    ()

    (Universidad Iberoamericana)

  • María José Roa

    ()

    (Centro de Investigación y Docencia Económicas)

In this paper we analyze the relationship between financial decisions, information acquisition, and trust. In particular, our hypothesis is that financial transactions depend, among other variables, on the level of trust, reciprocity and association among individuals. Also, individuals’ willingness to acquire and process information relevant to perform financial transactions is related not only to their cognitive abilities, but also to the level of trust they have in the financial institutions. We conducted a field experiment using the trust game, with two important variations, with the partners of an of credit and savings cooperative located in a rural area of México. Our results indicate that those individuals who frequently visit their friends show greater willingness to trust other individuals. In contrast, those individuals who visit their families more regularly show less willingness to reciprocate, while active members of the cooperative show greater reciprocity. Regarding the acquisition of information, we find that just over 2/3 of the participants buy the maximum of pieces of information. However, none of the pieces of information acquired appears to affect the transfers among participants. Possibly for our experimental subjects trust plays an overextended role in financial decision making that makes information acquisition less relevant than it is for other types of individuals making the same sort of decisions.

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File URL: http://www.ugr.es/~teoriahe/RePEc/gra/wpaper/thepapers10_02.pdf
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Paper provided by Department of Economic Theory and Economic History of the University of Granada. in its series ThE Papers with number 10/02.

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Length: 42 pages
Date of creation: 17 Feb 2010
Date of revision:
Handle: RePEc:gra:wpaper:10/02
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  1. Mark Rosenzweig & Andrew D. Foster, . "Learning by Doing and Learning from Others: Human Capital and Technical Change in Agriculture," Home Pages _068, University of Pennsylvania.
  2. Lusardi, Annamaria & Mitchell, Olivia S., 2010. "How ordinary consumers make complex economic decisions: Financial literacy and retirement readiness," CFS Working Paper Series 2010/11, Center for Financial Studies (CFS).
  3. Dean S. Karlan, 2005. "Using Experimental Economics to Measure Social Capital and Predict Financial Decisions," American Economic Review, American Economic Association, vol. 95(5), pages 1688-1699, December.
  4. Johansson-Stenman, Olof & Mahmud, Minhaj & Martinsson, Peter, 2005. "Trust and Religion: Experimental Evidence from Bangladesh," Working Papers in Economics 167, University of Gothenburg, Department of Economics.
  5. Abigail Barr & Marleen Dekker & Marcel Fafchamps, 2012. "Who Shares Risk with Whom under Different Enforcement Mechanisms?," Economic Development and Cultural Change, University of Chicago Press, vol. 60(4), pages 677 - 706.
  6. Chantarat, Sommarat & Barrett, Christopher B., 2008. "Social Network Capital, Economic Mobility and Poverty Traps," MPRA Paper 6841, University Library of Munich, Germany.
  7. repec:pri:rpdevs:gamespaper is not listed on IDEAS
  8. Berg Joyce & Dickhaut John & McCabe Kevin, 1995. "Trust, Reciprocity, and Social History," Games and Economic Behavior, Elsevier, vol. 10(1), pages 122-142, July.
  9. Michelle Adato & Michael Carter & Julian May, 2006. "Exploring poverty traps and social exclusion in South Africa using qualitative and quantitative data," Journal of Development Studies, Taylor & Francis Journals, vol. 42(2), pages 226-247.
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