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Intentions and Consequences An Experimental Investigation of Trust and Reciprocity Determinants

  • Werner Güth

    ()

    (Max Planck Institute of Economics, Strategic Interaction Group)

  • Harriet Mugera

    (School of Social Sciences, University of Trento, Italy)

  • Andrew Musau

    (School of Social Sciences, University of Trento, Italy; Faculty of Economics and Social Sciences, University of Agder, Norway)

  • Matteo Ploner

    (Cognitive and Experimental Economics Laboratory, University of Trento, Italy)

We experimentally manipulate the efficiency of trust and reciprocity in a modified Investment Game. The aim of our manipulation is to test whether reciprocity is mainly affected by payoff consequences of trust or by intentions underlying it. We find that intentions matter and that consequences have an asymmetric impact: trustees reward trust more when trust is more efficient but do not adjust rewards to the efficiency of their own actions. As a result, profitability of trust is fostered by efficiency of trust as well as by efficiency of reciprocity. However, trustors do not fully exploit the high efficiency gains offered by investments and display only moderate trust.

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Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2012-029.

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Date of creation: 20 Jun 2012
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Handle: RePEc:jrp:jrpwrp:2012-029
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  1. La Porta, Rafael, et al, 1997. "Trust in Large Organizations," American Economic Review, American Economic Association, vol. 87(2), pages 333-38, May.
  2. Fehr, Ernst & Schmidt, Klaus M., 1999. "A theory of fairness, competition, and cooperation," Munich Reprints in Economics 20650, University of Munich, Department of Economics.
  3. Jordi Brandts & Gary Charness, 2011. "The strategy versus the direct-response method: a first survey of experimental comparisons," Experimental Economics, Springer, vol. 14(3), pages 375-398, September.
  4. Williamson, Oliver E, 1993. "Calculativeness, Trust, and Economic Organization," Journal of Law and Economics, University of Chicago Press, vol. 36(1), pages 453-86, April.
  5. McCabe, Kevin A. & Rigdon, Mary L. & Smith, Vernon L., 2003. "Positive reciprocity and intentions in trust games," Journal of Economic Behavior & Organization, Elsevier, vol. 52(2), pages 267-275, October.
  6. Johnson, Noel D. & Mislin, Alexandra A., 2011. "Trust games: A meta-analysis," Journal of Economic Psychology, Elsevier, vol. 32(5), pages 865-889.
  7. Eckel, Catherine C. & Wilson, Rick K., 2004. "Is trust a risky decision?," Journal of Economic Behavior & Organization, Elsevier, vol. 55(4), pages 447-465, December.
  8. Harvey James, 2002. "The Trust Paradox: A Survey of Economic Inquiries Into the Nature of Trust and Trustworthiness," Microeconomics 0202001, EconWPA.
  9. Matthew Rabin., 1992. "Incorporating Fairness into Game Theory and Economics," Economics Working Papers 92-199, University of California at Berkeley.
  10. Houser, Daniel & Schunk, Daniel & Winter, Joachim, 2010. "Distinguishing trust from risk: An anatomy of the investment game," Journal of Economic Behavior & Organization, Elsevier, vol. 74(1-2), pages 72-81, May.
  11. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
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