Social Influence in Trustors' Neighborhoods
The aim of this paper is to ascertain whether trust is affected by contagion and herding in small groups of trustors who can observe each other’s choices over time. We account for three important factors of trustors’preferences, namely: risk attitude, generosity and expected trustworthiness. Using our data, we test the basic hypothesis that an individual's propensity to trust recipients in the Trust Game may be affected by the observed behavior of other trustors. Our results confirm that trust is affected by contagion effects. Furthermore, we find that specific types of agents (generous or untrusting) frequently imitate the same type when placed in the same group. Finally, we find that untrusting individuals are less affected by their peers compared to generous individuals, and that they are less prone to imitation when placed in groups of agents who have the same characteristics.
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