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Crowding Out Trust: The Adverse Effects of Verification. An Experiment

Author

Listed:
  • Gerardo A. Guerra

Abstract

Through an experiment this study investigates the effects that verification has on honest traders. This paper demonstrates that by reducing the scope for trust verification can have a negative effect on the behaviour of honest individuals. Specifically, the analysis shows that trustworthy agents are willing to punish or seek compensation from those that deprive them of trust opportunities through the use of verification. Regulatory implications are discussed.

Suggested Citation

  • Gerardo A. Guerra, 2002. "Crowding Out Trust: The Adverse Effects of Verification. An Experiment," Economics Series Working Papers 98, University of Oxford, Department of Economics.
  • Handle: RePEc:oxf:wpaper:98
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    File URL: http://www.economics.ox.ac.uk/materials/working_papers/paper098.pdf
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    Cited by:

    1. Dickinson, David & Villeval, Marie-Claire, 2008. "Does monitoring decrease work effort?: The complementarity between agency and crowding-out theories," Games and Economic Behavior, Elsevier, vol. 63(1), pages 56-76, May.

    More about this item

    Keywords

    verification; trust; ultimatum bargaining; experiments;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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