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Trust and Reciprocity with Transparency and Repeated Interactions

Author

Listed:
  • Kiridaran Kanagaretnam
  • Stuart Mestelman
  • S.M.Khalid Nainar
  • Mohamed Shehata

Abstract

This paper uses data from a controlled laboratory environment to study the impact of transparency (i.e., complete information versus incomplete information) and repeated interactions on the level of trust and trustworthiness in an investment game setting. The key findings of the study are that transparency (complete information) significantly increases trusting behavior in one-shot interactions. This result persists in repeated interactions. Further, transparency appears important for trustworthiness in one-shot interactions. In addition, repeated interaction increases trust and reciprocity with or without transparency. These results suggest transparency is important in building trust in business environments such as alliances and joint-ventures which are loosely connected organizational forms that bring together otherwise independent firms. It also provides support for the Sarbanes-Oxley Act of 2002 (SOX) and similar legislation elsewhere which attempt to regain investors’ trust in corporate management and financial markets by stipulating enhanced disclosures.

Suggested Citation

  • Kiridaran Kanagaretnam & Stuart Mestelman & S.M.Khalid Nainar & Mohamed Shehata, 2009. "Trust and Reciprocity with Transparency and Repeated Interactions," Department of Economics Working Papers 2009-03, McMaster University.
    • Handle: RePEc:mcm:deptwp:2009-03
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    File URL: http://socserv.mcmaster.ca/econ/rsrch/papers/archive/2009-03.pdf
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    Cited by:

    1. Kanagaretnam, Kiridaran & Mestelman, Stuart & Khalid Nainar, S.M. & Shehata, Mohamed, 2012. "The impact of empowering investors on trust and trustworthiness," Journal of Economic Psychology, Elsevier, vol. 33(3), pages 566-577.
    2. Shiv Ratan Agrawal & Divya Mittal, 2019. "How Does Transparency Complement Customer Satisfaction and Loyalty in the Restaurant Business?," Global Business Review, International Management Institute, vol. 20(6), pages 1423-1444, December.
    3. Appelbaum, Elie & Katz, Eliakim, 2022. "Bonding by guilt: A resolution of the finite horizon prisoners’ dilemma," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 100(C).
    4. Wei Zhu & Wei‐jian Li & Lei Wang, 2024. "The impact of environmental, social, and governance ratings on corporate innovation: From the perspective of informal institutions," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 45(4), pages 2000-2022, June.
    5. Donkor, Emmanuel & Mbeche, Robert & Mithofer, Dagmar, "undated". "Relational contract decision of retailers in the grasshopper value chain in Uganda," 61st Annual Conference, Berlin, Germany, September 22-24, 2021 317078, German Association of Agricultural Economists (GEWISOLA).
    6. Amin Shakourloo & Asil Azimli, 2025. "The role of greenwashing scandals on investors’ herding behavior," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 49(3), pages 733-767, September.
    7. Tim Kraft & León Valdés & Yanchong Zheng, 2018. "Supply Chain Visibility and Social Responsibility: Investigating Consumers’ Behaviors and Motives," Manufacturing & Service Operations Management, INFORMS, vol. 20(4), pages 617-636, October.
    8. Kanagaretnam, Kiridaran & Mestelman, Stuart & Nainar, S.M. Khalid & Shehata, Mohamed, 2014. "Transparency and empowerment in an investment environment," Journal of Business Research, Elsevier, vol. 67(9), pages 2030-2038.
    9. Mittal, Divya & Agrawal, Shiv Ratan, 2016. "Price transparency reflects assurance and reliability," Journal of Retailing and Consumer Services, Elsevier, vol. 31(C), pages 43-51.
    10. Gomaa, Mohamed & Kanagaretnam, Kiridaran & Mestelman, Stuart & Shehata, Mohamed, 2015. "Exercising empowerment in an investment environment," Journal of Behavioral and Experimental Finance, Elsevier, vol. 7(C), pages 33-41.
    11. Donkor, Emmanuel & Mbeche, Robert & Mithöfer, Dagmar, 2021. "Purchasing Behaviour and Relational Contract Decisions of Retailers in Grasshopper Value Chains in Uganda," 2021 Conference, August 17-31, 2021, Virtual 315105, International Association of Agricultural Economists.
    12. Tessa Haesevoets & David De Cremer & Leander De Schutter & Jack McGuire & Yu Yang & Xie Jian & Alain Van Hiel, 2021. "Transparency and Control in Email Communication: The More the Supervisor is Put in cc the Less Trust is Felt," Journal of Business Ethics, Springer, vol. 168(4), pages 733-753, February.
    13. Fatemeh Mariam Zahedi & Yan Chen & Huimin Zhao, 2024. "Ontology-Based Intelligent Interface Personalization for Protection Against Phishing Attacks," Information Systems Research, INFORMS, vol. 35(3), pages 1463-1478, September.

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    Keywords

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    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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