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Reciprocity and Trust: Personality Psychology meets Behavioral Economics

Listed author(s):
  • Ricardo Andrés Guzmán
  • Rodrigo Harrison
  • Nureya Abarca
  • Mauricio G. Villena

We propose a model of strong reciprocity and trust that combines elements of personality psychology and behavioral economics. In the model, positive reciprocity and negative reciprocity are components of individual utility functions, while trust is an individual bias that distorts the beliefs about the trustworthiness of others. Underlying personality traits determine the functional form of the utility functions and the magnitude of the biases. We tested the model by means of an economic experiment, using 212 college students as experimental subjects. First, each subject completed a psychometric questionnaire to measure his levels of positive reciprocity, negative reciprocity, and trust. Following this, the subjects played 65 rounds of a sequential prisoner's dilemma with random re-matching and payoffs that changed from round to round. From the game behavior of each subject we estimated his utility function and the bias in his beliefs. The experimental results support the hypotheses of the model; the psychometric measures of reciprocity determined the individual utility functions, while the psychometric measures of trust determined the individual biases.

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File URL: http://www.economia.uc.cl/docs/dt_439.pdf
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Paper provided by Instituto de Economia. Pontificia Universidad Católica de Chile. in its series Documentos de Trabajo with number 439.

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Date of creation: 2013
Handle: RePEc:ioe:doctra:439
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  1. Joseph E. Harrington Jr. & Andrzej Skrzypacz, 2007. "Collusion under monitoring of sales," RAND Journal of Economics, RAND Corporation, vol. 38(2), pages 314-331, 06.
  2. Joseph E. Harrington & Andrzej Skrzypacz, 2011. "Private Monitoring and Communication in Cartels: Explaining Recent Collusive Practices," American Economic Review, American Economic Association, vol. 101(6), pages 2425-2449, October.
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