Sorting with shame in the laboratory
Trust is indispensable to fiduciary fields (e.g., credit rating), where experts exercise wide discretion on others behalf. Can the shame from scandal sort trustworthy people out of a fiduciary field? I tested for the possibility in a charitable contribution game where subjects could be "ungenerous" when unobserved. After establishing that "generosity" required a contribution of more than $6, subjects were given the choice of contributing either $5 publicly or $0-$10 privately. Almost all control subjects chose to contribute privately less than $2. The majority of treatment subjects, after being told the prediction that they were unlikely to contribute more than $2, if they contributed privately, contributed $5 publicly. This suggests that the mere belief that a subject would exploit the greater discretion and unobservability of a fiduciary-like position can deter entry into such a position. Thus, scandals that create such a belief could repel shame-sensitive people from that field -- possibly to the detriment of the field and the economy as a whole. The shame externality of a scandals on private judgments may also been seen in politically correct speech after demonstrated racial prejudice of others.
|Date of creation:||27 Oct 2008|
|Date of revision:||27 Jul 2009|
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784828000000000046, UCLA Department of Economics.
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