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Neuroeconomic Foundations of Trust and Social Preferences

  • Fehr, Ernst

    ()

    (University of Zurich)

  • Fischbacher, Urs

    ()

    (University of Konstanz)

  • Kosfeld, Michael

    ()

    (Goethe University Frankfurt)

This paper discusses recent neuroeconomic evidence related to other-regarding behaviors and the decision to trust in other people's other-regarding behavior. This evidence supports the view that people derive nonpecuniary utility (i) from mutual cooperation in social dilemma (SD) games and (ii) from punishing unfair behavior. Thus, mutual cooperation and the punishment of free riders in SD games is not irrational, but better understood as rational behavior of people with corresponding social preferences. We also report the results of a recent study that examines the impact of the neuropeptide Oxytocin (OT) on trusting and trustworthy behavior in a sequential SD. Animal studies have identified Oxytocin as a hormone that induces prosocial approach behavior, suggesting that it may also affect prosocial behavior in humans. Indeed, the study shows that subjects given Oxytocin exhibit much more trusting behavior, suggesting that OT has a direct impact on certain aspects of subjects' social preferences. Interestingly, however, although Oxytocin affects trusting behavior, it has no effect on subjects' trustworthiness.

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File URL: http://ftp.iza.org/dp1641.pdf
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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1641.

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Length: 15 pages
Date of creation: Jun 2005
Date of revision:
Publication status: published in: American Economic Review, 2005, 95 (2), 346-351
Handle: RePEc:iza:izadps:dp1641
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  1. Fehr, Ernst & Kremhelmer, Susanne & Schmidt, Klaus M., 2008. "Fairness and the optimal allocation of ownership rights," Munich Reprints in Economics 20626, University of Munich, Department of Economics.
  2. Armin Falk & Ernst Fehr & Christian Zehnder, . "The Behavioral Effects of Minimum Wages," IEW - Working Papers 247, Institute for Empirical Research in Economics - University of Zurich.
  3. Salvador Barberà & Anke Gerber, 2005. "A Note on the Impossibility of a Satisfactory Concept of Stability for Coalition Formation Games," Working Papers 248, Barcelona Graduate School of Economics.
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  7. Falk, Armin & Zweimüller, Josef, 2005. "Unemployment and Right-Wing Extremist Crime," CEPR Discussion Papers 4997, C.E.P.R. Discussion Papers.
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  12. Fehr, Ernst & Fischbacher, Urs & Kosfeld, Michael, 2005. "Neuroeconomic Foundations of Trust and Social Preferences," IZA Discussion Papers 1641, Institute for the Study of Labor (IZA).
  13. Rafael Lalive & Jan C. van Ours & Josef Zweimüller, 2004. "How Changes in Financial Incentives Affect the Duration of Unemployment," CESifo Working Paper Series 1337, CESifo Group Munich.
  14. Ernst Fehr & Simon Gaechter, 2003. "Altruistic Punishment in Humans," Microeconomics 0305006, EconWPA.
  15. Christian Ewerhart & Nuno Cassola & Steen Ejerskov & Natacha Valla, 2009. "Optimal allotment policy in central bank open market operations," The European Journal of Finance, Taylor & Francis Journals, vol. 15(4), pages 405-420.
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  18. Alois Stutzer & Bruno S. Frey, 2004. "Making International Organizations More Democratic," CREMA Working Paper Series 2004-28, Center for Research in Economics, Management and the Arts (CREMA).
  19. Patarick Leoni & Stephane Luchini, 2006. "Designing the Financial Tools to Promote Universal Access to AIDS Care," Economics, Finance and Accounting Department Working Paper Series n1711106, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
  20. Foellmi, Reto & Zweimüller, Josef, 2005. "Income Distribution and Demand-Induced Innovations," CEPR Discussion Papers 4985, C.E.P.R. Discussion Papers.
  21. Bruno S. Frey, 2005. "Knight Fever – Towards an Economics of Awards," CESifo Working Paper Series 1468, CESifo Group Munich.
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  23. Philipp C. Wichardt & Pavlo R. Blavatskyy, . "Base-Rate Neglect and Imperfect Information Acquisition," IEW - Working Papers 233, Institute for Empirical Research in Economics - University of Zurich.
  24. Alois Stutzer & Lukas Kienast, 2004. "Demokratische Beteiligung und Staatsausgaben: Die Auswirkungen des Frauenstimmrechts," CREMA Working Paper Series 2004-26, Center for Research in Economics, Management and the Arts (CREMA).
  25. Gruetter, Max & Lalive, Rafael, 2009. "The importance of firms in wage determination," Labour Economics, Elsevier, vol. 16(2), pages 149-160, April.
  26. De Giorgi, Enrico & Post, Thierry, 2008. "Second-Order Stochastic Dominance, Reward-Risk Portfolio Selection, and the CAPM," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 43(02), pages 525-546, June.
  27. Christian Ewerhart, 2006. "The Effect of Sunk Costs on the Outcome of Alternating-Offers Bargaining Between Inequity-Averse Agents," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 58(2), pages 184-203, April.
  28. Peter Woehrmann & Willi Semmler & Martin Lettau, . "Nonparametric Estimation of the Time-varying Sharpe Ratio in Dynamic Asset Pricing Models," IEW - Working Papers 225, Institute for Empirical Research in Economics - University of Zurich.
  29. Pavlo R. Blavatskyy, . "A Stochastic Expected Utility Theory," IEW - Working Papers 231, Institute for Empirical Research in Economics - University of Zurich.
  30. Christian Ewerhart & Christoph Nitzsche, . ": On the Notion of the First Best in Standard Hidden Action Problems," IEW - Working Papers 229, Institute for Empirical Research in Economics - University of Zurich.
  31. Philipp C. Wichardt, . "An Application of Global Games to Signalling Models," IEW - Working Papers 223, Institute for Empirical Research in Economics - University of Zurich.
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