Trust in surveys and games – A methodological contribution on the influence of money and location

This paper explores methods to study trust. In a variety of settings, answers to survey questions and choices in a trust game are obtained from student sample pools. Some subjects are approached by mail and execute their task at home whereas others participate in classroom experiments. No differences between the results obtained by these methods are observed. Furthermore, one additional group plays the trust game with purely hypothetical payments, and another receives random lottery payments. This changes trust behavior dramatically, whereas trustworthiness is unaffected. Subjects without any financial incentives exhibit less trust and their trust choices are significantly correlated with survey trust answers. There is no such correlation for the corresponding choices with real payments.     

The role of beliefs,trust, and risk in contributions to a public good

This paper experimentally investigates if and how beliefs, trust, and risk attitudes are associated with cooperative behavior. By applying incentivized elicitation methods to measure these concepts, we find that beliefs about others’ cooperation and trust are positively correlated with cooperation in a public goods game. However, even though contributing to a public good resembles a situation of making decisions under strategic uncertainty, elicited risk preferences do not seem to explain cooperation in a systematic way.     

Sex differences in trust and trustworthiness: A meta-analysis of the trust game and the gift-exchange game

We present a meta-analytic review of the literature on sex differences in the trust game (174 effect sizes) and the related gift-exchange game (35 effect sizes). Based on parental investment theory and social role theory we expected men to be more trusting and women to be more trustworthy. Indeed, men were more trusting in the trust game (g = 0.22), yet we found no significant sex difference in trust in the gift-exchange game (g = 0.15). Regarding trustworthiness, we found no significant sex difference in the trust game (g = −0.04), and we found men, not women, to be more trustworthy in the gift-exchange game (g = 0.33). These results suggest that men send more money than women do when their money is going to be multiplied, thereby creating an efficiency gain. This so-called “male multiplier effect” may be explained by a stronger psychological tendency in men to acquire resources.     

Risky choice in interpersonal context: Do people dare because they care?

This paper presents an experimental study investigating the interplay of individuals’ other-regarding preferences and individuals’ risk attitude. Participants (N = 120) had to make choices between a certain and risky payoff only for themselves (individual context) and choices in which the participants were paired with another randomly assigned participant who functioned as a passive recipient (interpersonal context). In the interpersonal context the risky option was beneficial for the other person while the certain option was not. Thus, the interpersonal choice context was an abstract representation of the incentive structure in helping situations, which yield risk only for the helper. Risky options in the interpersonal context yielded different payoff distributions, which allowed us to identify how considerations of fairness affect interpersonal risky choices. To assess other-regarding preferences, a dictator game was played. First we found that participants were generally less risk averse in the interpersonal choices; however, the degree of risk aversion was affected by the distribution of payoffs between decider and recipient. Furthermore, we found that changes of risk aversion in an interpersonal context could be predicted with the proposed splits in the dictator game.     

Risk mitigation and trust: Experimental Evidence from Jordan and the United States

This paper examines how trust and trustworthiness respond to lowering the principal’s risk in cultural settings focused on risk mitigation vs. risk prevention. We employ a binary-choice trust game and show that principals are confronted with a complex optimization problem: risk mitigation lowers the principal’s cost of betrayal but if agents are inequality averse or reciprocally minded, it can also increase its likelihood. This may be exacerbated in cultures not used to fostering trust by risk mitigation. Our experiments suggest that lowering risk only increases trust in the United States but not in Jordan. In both countries, trustworthiness decreases as the principal’s vulnerability decreases. We extend our findings to naturally occurring vulnerabilities in addition to the financial ones created in the laboratory.     

Status and distrust: The relevance of inequality and betrayal aversion

Trust involves a willingness to accept vulnerability, comprised of the risk of being worse off than by not trusting, the risk of being worse off than the trusted party (disadvantageous inequality), and the risk of being betrayed by the trusted party. We examine how people’s status, focusing on sex, race, age and religion, affects their willingness to accept these three risks. We experimentally measure people’s willingness to accept risk in a decision problem, a risky dictator game, and a trust game, and compare responses across games. Groups typically considered having lower status in the US – women, minorities, young adults and non-Protestants – are averse to disadvantageous inequality while higher status groups – men, Caucasians, middle-aged people and Protestants – dislike being betrayed.     

What’s in a frame? Goal framing,trust and reciprocity

Economists often rely on the Berg et al. (1995) trust game, or variants thereof, to identify levels of trust and reciprocity, which are fundamental to discussions of social capital. But to what extent is behavior in this game sensitive to the way the instructions are framed? We use the Berg et al. trust game played for ten rounds with random re-matching to study this. We implement a number of variations in the way the game is presented to subjects. We show that levels of trust, reciprocity and returns to trust are significantly higher under “goal framing”, which highlights the conflict inherent in the game, between self-interest and maximizing social surplus. Furthermore, with such framing, trust measured via the experimental game exhibits significant positive correlation with trust measured via the Social Values Orientation questionnaire.     

Social capital and equilibrium selection in Stag Hunt games

Surveys of trusting attitudes are found to correlate with growth and development outcomes. The question of why trust attitudes correlate with economic growth remains open however. I argue that trust surveys capture facets of social capital not previously investigated, namely, coordination. Hence a complete investigation of the relationship between trust attitudes in growth must encompass their predictive power in a coordination game. This study shows that affirmative responses to surveys of trust attitudes correlate with and predict efficiency-supporting behavior in a Stag Hunt game.     

Is the beauty premium accessible to all? An experimental analysis

We conducted a trust game experiment to investigate whether women are trusted more when they wear makeup than when they do not. Facial attractiveness, which was manipulated through the application of makeup by a professional makeup artist, was measured before and after makeovers. Trustors were shown a photograph of their female counterparts before they made decisions about money transfers to trustees. The results showed that wearing makeup increased perceived attractiveness, which in turn led trustors to make larger transfers to female trustees during the trust game. Additionally, we discovered a pure makeup premium that was mediated by gender. Specifically, female trustees with makeup received larger transfers than female trustees without makeup when the trustors were men, even after controlling for female trustees’ levels of attractiveness.     

Adolescents gradually improve at detecting trustworthiness from the facial features of unknown adults

People can (to some extent) detect trustworthiness from the facial features of social partners, and populations which underperform at this task are at a greater risk of abuse. Here we focus on situations in which adolescents make a decision whether to trust an unknown adult. Adolescents aged 13–18 (N = 540) played a trust game, in which they made decisions whether to trust unknown adults based on their picture. We show that trusting decisions become increasingly accurate with age, from a small effect size at age 13 to an effect size 2.5 times larger at age 18. We consider the implications of this result for the development of prosociality and the possible mechanisms underlying the development of trustworthiness detection from faces.     

SIMULTANEOUS DECISION‐MAKING IN COMPETITIVE AND COOPERATIVE ENVIRONMENTS

We experimentally investigate simultaneous decision‐making in two contrasting environments: one that encourages competition (lottery contest) and one that encourages cooperation (public good game). We find that simultaneous participation in the public good game affects behavior in the contest, decreasing sub‐optimal overbidding. Contributions to the public good are not affected by participation in the contest. The direction of behavioral spillover is explained by differences in strategic uncertainty and path‐dependence across games. Our design allows us to compare preferences for cooperation and competition. We find that in early periods, there is a negative correlation between decisions in competitive and in cooperative environments. (JEL C72, C91)     

What drives lottery demand? Evidence from China's lottery practice

As governments draw increasing revenues from the lottery industry, it has become academically important, as well as for policy purposes, to better understand the factors that can explain lottery purchase decisions. The traditional literature uses either the expected return of each lottery ticket (effective price approach) or the jackpot size (jackpot approach) to explain the variation in lottery demand. In this article, we examine these two factors by exploiting a unique lottery game set-up in lottery practice in China. This lottery game is similar to lotteries in other countries except that there is a cap policy on the grand prize, which limits the reward of each jackpot winner. We show that this complex cap policy actually causes both the lottery effective price and the jackpot size to remain almost fixed for the majority of the time while lottery demand significantly fluctuates. The lack of variation suggests that, in China's practice, neither the effective price nor the jackpot size can explain the observed variation in lottery sales. Instead, we find that the size of the lottery rollover fits well in explaining the variation in lottery demand.     

Trust and embedded markets: A multi-method investigation of consumer transactions

Previous work shows that, as the buyer's uncertainty about the quality of some good or service increases, so does the tendency to purchase that good or service via embedded transactions, rather than from strangers. While this previous work explains variation in embedded exchange across different types of purchases, it does not address variation in embedded exchange across persons. Our research integrates the embeddedness and trust literatures to explain variation in within-network exchanges based on an interaction of the purchaser's generalized trust and the level of uncertainty entailed in the purchase (i.e., whether there exists an incentive for the seller to misrepresent the quality of some good or service). For purchases involving uncertainty, low-trusters will tend to forgo risky transactions with strangers, opting instead for the increased certainty of embedded markets. High-trusters, on the other hand, will be more likely to transact with strangers (despite the increased risk), from whom they can often find better deals. We should not expect any differences between high- and low-trusters for products that do not entail uncertainty. Results from two data sources, responses from a nationally representative survey of the U.S. population and behavioral responses in new laboratory experiments, provide support for the arguments.     

How activating cognitive content shapes trust: A subliminal priming study

The activation of cognitive contents plays a prominent role in social psychological research. Yet, so far this has received little attention in economics. In our research we connect a standard social psychological manipulation to activate cognitive content (a trust vs. distrust priming manipulation) to a classic paradigm from economics (a trust game). Our findings demonstrate that subliminally activating the concept of trust (vs. distrust) leads participants to judge a series of strangers as more (vs. less) trustworthy. Moreover, our research shows for the first time that such a subliminal priming manipulation shapes the subsequent sending behavior in a fictitious version of a standard economic trust game. This suggests that psychological priming techniques allow new insights into what determines beliefs in economic games.     

Group payoffs as public signals

We study experimentally the effect on individual behavior of comparative, but payoff-irrelevant, information in a near-minimal group setting. Specifically, in each round, group members see the groups’ cumulative payoffs, which consist of an aggregation of the earnings of each member of the group in the round. Our novel experimental design incorporates two games (the Trust game and the Dictator game) whose payoffs are carefully chosen to ensure cross-game comparability. In the baseline, no comparative information is displayed; the sessions are otherwise identical.Our first set of results shows that the display is sufficient to induce an in-group bias, which can neither be attributed to mere categorization of subjects into groups nor to a stronger sense of group identity as a result of the display. Moreover, we corroborate existing results, which find that, relative to the baseline, the display is welfare reducing in the Trust game. Our second set of results shows that when comparing the allocators’ decisions across the two games, a first mover’s trust is reciprocated by the second mover independently of group identity.     

Personality preferences in laboratory economics experiments

Student volunteers at the U.S. Naval Academy (USNA) participated in one of the following one-shot games: a dictator game, an ultimatum game, a trust game, or a prisoner's dilemma game. We find limited support for the importance of personality type for explaining subjects’ decisions. With controls for personality preferences, we find little evidence of behavioral differences between males and females. Furthermore, we conclude that seniority breeds feelings of entitlement—seniors at USNA generally exhibited the least cooperative or other-regarding behavior.     

Trust in humans and robots: Economically similar but emotionally different

Trust-based interactions with robots are increasingly common in the marketplace, workplace, on the road, and in the home. However, a valid concern is that people may not trust robots as they do humans. While trust in fellow humans has been studied extensively, little is known about how people extend trust to robots. Here we compare trust-based investments and self-reported emotions from across three nearly identical economic games: human-human trust games, human-robot trust games, and human-robot trust games where the robot decision impacts another human. Robots in our experiment mimic humans: they are programmed to make reciprocity decisions based on previously observed behaviors by humans in analogous situations. We find that people invest similarly in humans and robots. By contrast the social emotions (i.e., gratitude, anger, pride, guilt) elicited by the interactions (but not the non-social emotions) differed across human and robot trust games. Emotional reactions depended on the trust game interaction, and how another person was affected.     

THE “SALES AGENT” PROBLEM: EFFORT/LEISURE ALLOCATION UNDER PERFORMANCE PAY AS BEHAVIOR TOWARDS RISK

The choice between safe and risky assets represents behavior towards risk: more risk‐averse investors buy more safe assets. We develop and test a general model that applies this intuition to the time allocation between risky effort and risk‐free leisure under linear incentives. When risk increases with effort, risk‐averse agents choose less effort, but when risk is independent of effort, effort choice is unaffected by risk preferences. In many incentive contracts, income risk is multiplicative with, rather than additive to effort, sales commissions being one example. In such cases, lower effort by the risk‐averse is a hitherto undocumented behavior towards risk (JEL C91, M52, J33)     

To pay or to apologize? On the psychology of dealing with unfair offers in a dictator game

Prior research has largely failed to focus on how transgressors can promote trust when having made unfair offers in bargaining. I investigated in the context of receiving an unfair offer in a dictator game when financial compensations and when apologies are most effective in motivating trust behavior by the violated party. I hypothesized that when losses were allocated, the violated party would be motivated to show more trust behavior towards the transgressor when a financial compensation (resulting again in equal final outcomes) relative to an apology was delivered, whereas when gains were allocated, apologies would be more effective in promoting trust behavior than a financial compensation. Results from a laboratory study indeed supported this prediction as such demonstrating the importance of how allocation decisions are framed (i.e., loss or gain) in testing the effectiveness of trust repair strategies (financial compensations vs. apologies).     

Tracing risky decisions for oneself and others: The role of intuition and deliberation

This study contributes to the understanding of how individuals make choices for themselves and on behalf of others in a risky environment. In a laboratory eye-tracking experiment, we investigate whether risk preferences, decision error, and information processing differ between decisions made for oneself and on behalf of others. While we find no differences in risk preferences when deciding for oneself or for someone else, individuals have a greater decision error when deciding for others. Process data partly explains these differences. Individuals spend less time, have less fixations, and inspect less information when deciding for others. We detect similar processing patterns when comparing intuitive and deliberative decision making. We argue that the processing of decisions for oneself is more effortful and involves more extensive deliberation which, in turn, is related to less decision errors.