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Incentivising trust

Author

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  • Pamela Lenton

    () (Department of Economics, The University of Sheffield)

  • Paul Mosley

    (Department of Economics, The University of Sheffield)

Abstract

We argue that trust can be incentivised by measures which increase the ability of trusters to protect themselves against risk. We work within the framework originally established by Berg, Dickhaut and McCabe (1995) in which trust is measured experimentally as the ability to generate reciprocity in response to an initial offer of money within a two-person game. An incentive is conveyed both by means of variations in the multiplier applied to the first player’s initial offer and by giving the first player the opportunity to insure themselves against the possibility that the second player will fail to reciprocate their initial offer. Measured trust is strongly responsive to both these incentives. Thus third parties have the ability to influence the outcome of the game, not only, as in the analysis of Charness et al (2008), by punishing failure to reciprocate and rewarding ‘good’ initial offers, but also by offering protection which strengthens the first player’s risk efficacy, or ratio of assets to risk.

Suggested Citation

  • Pamela Lenton & Paul Mosley, 2009. "Incentivising trust," Working Papers 2009004, The University of Sheffield, Department of Economics, revised Mar 2009.
  • Handle: RePEc:shf:wpaper:2009004
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    File URL: http://shef.ac.uk/content/1/c6/09/50/48/SERP2009004.pdf
    File Function: First version, 2009
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    References listed on IDEAS

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    Cited by:

    1. Johnson, Noel D. & Mislin, Alexandra A., 2011. "Trust games: A meta-analysis," Journal of Economic Psychology, Elsevier, vol. 32(5), pages 865-889.
    2. Pamela Lenton & Mike Masiye & Paul Mosley, 2017. "Taxpayer’s dilemma: how can ‘fiscal contracts’ work in developing countries?," Working Papers 2017004, The University of Sheffield, Department of Economics.

    More about this item

    Keywords

    Experimental economics; Game theory; Risk; Reciprocity;

    JEL classification:

    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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