Trust and risk revisited

A trustor faces a risky choice in the trust game when he acts upon his belief regarding the chances of betrayal by the trustee. Despite intensive research there is no clear evidence for a link between lottery risk preferences and risk involved in trusting others. We argue that this is due to crucial differences between the risk measurements in the two settings. Trusting is giving up control to a human while lottery risk arises from a mechanistic randomization device. We propose a risky trust game that experimentally measures risk in the same context as the standard trust game, but nevertheless reduces the trust decision to objective risk. Our results show that transfers in the trust game can indeed be explained by individual risk attitudes elicited with the risky trust game, while lottery risk preferences have no explanatory power.     

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.     

Trust and reciprocity among international groups: Experimental evidence from Austria and Japan

This paper explores national identity in trust and reciprocity at the intra- and international levels by adopting a modified trust game played among groups from Austria and Japan, wherein subjects play the roles of trustor and trustee consecutively without any information feedback. Although the intranational trust levels in both countries are identical, the international trust for Japanese groups is less than that of Austrian groups. On the other hand, the international reciprocity for Japanese groups is greater than that of Austrian groups. Additionally, the Japanese reciprocation level toward Austrians is higher than that toward Japanese.     

Group-based trust,trustworthiness and voluntary cooperation: Evidence from experimental and survey data in China

Trust, trustworthiness and cooperation are crucial in achieving social goals, and are thus essential components of social capital. This paper reports the results of a series of lab and artefactual field experiments carried out in Shanghai to evaluate some of the key indicators of social capital in China. The groups selected for the study are middle school and undergraduate university students and community residents. The experiments comprise two public goods games, a gambling game and a trust game. The overall level of trust is negatively related to age, although trusting behavior is also affected by other factors, such as risk-taking.     

Dictator game variants with probabilistic (and cost-saving) payoffs: A systematic test

Driven by methodological concerns, theoretical considerations, and previous evidence, I systematically test the validity of common dictator game variants with probabilistic payoffs. Using a unified experimental framework, I include four approaches and compare them to a standard dictator game: involving fewer receivers than dictators, paying only some players, paying only some decisions, and role uncertainty. I also relate transfers in the dictator game variants to established complementary individual difference measures of prosociality: social value orientation, personal values, a donation to charity, and the Big Five personality factor agreeableness. My data shows that the standard dictator game presents the expected correlations with the complementary measures of prosociality. Involving fewer receivers yields comparably valid results. By contrast, when only some players or decisions are paid or, particularly, when subjects face role uncertainty, the expected associations with complementary prosociality measures are distorted. Under role uncertainty, generosity is also significantly biased upward. I conclude that the validity of dictator game outcomes is highly sensitive to the applied methods. Not all dictator game variants can be recommended for the valid measurement of social preferences.     

Motivational crowding out effects in charitable giving: Experimental evidence

This paper tests motivational crowding out in the domain of charitable giving. A novelty is that our experiment isolates alternative explanations for the decline of giving, such as strategic considerations of decision-makers. Moreover, preference elicitation allows us to focus on the reaction of donors characterized by different degrees of intrinsic motivation. In the charitable-giving setting subjects donate money to the German “Red Cross” in two consecutive donations. The first dictator game is modified, i.e., donors face with equal probability an ex post reimbursement or a subsequent payment. The second game is a standard dictator game. We find that after an ex post change in the price of giving of the first donation, substantially more donors with a high degree of intrinsic motivation decrease donations than subjects with a low degree of intrinsic motivation and donors who did not experience a price effect. In a replication study we find support for these results for subjects who have previously participated in at least one economic experiment.     

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.     

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.     

Locus of control and other-regarding behavior: Experimental evidence from a large heterogeneous sample

This paper investigates the relationship between locus of control and other-regarding behavior in a large and heterogeneous sample of the French population. We relate locus of control with incentivized measures of other-regarding behavior in the dictator and ultimatum games. Participants with high internal locus of control offer comparatively less in situations with passive responders (dictator game) but tend to increase their offers when their counterparts have veto power (ultimatum game). Moreover, they appear better at anticipating responders’ behavior in the ultimatum game, which leads to offers with a higher probability of acceptance and higher expected payoff. Some results for the ultimatum game, however, are sensitive to model specification and sample composition. Our findings suggest that a high internal locus of control increases individuals’ ability to adapt to strategic and non-strategic settings.     

Trust games: A meta-analysis

We collect data from 162 replications of the Berg, Dickhaut, and McCabe Investment game (the “trust” game) involving more than 23,000 participants. We conduct a meta-analysis of these games in order to identify the effect of experimental protocols and geographic variation on this popular behavioral measure of trust and trustworthiness. Our findings indicate that the amount sent in the game is significantly affected by whether payment is random, and whether play is with a simulated counterpart. Trustworthiness is significantly affected by the amount by which the experimenter multiplies the amount sent, whether subjects play both roles in the experiment, and whether the subjects are students. We find robust evidence that subjects send less in trust games conducted in Africa than those in North America.     

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.     

Does players’ identification affect trust and reciprocity in the lab?

Reputation mechanisms are mainly based on information sharing by traders about private trading experience. Each trader can therefore rely on his own past experience as a trader and on other traders’ past experience. The former is the direct component of the reputation mechanism and the latter the indirect component ( [Bolton et al., 2004a] and [Bolton et al., 2004b]). We design an experiment for isolating the direct component of the reputation system and studying its effect on the level of trust and reciprocity in a population where agents play both roles (trustor and trustee). Our experiment consists on three treatments of a finitely repeated investment game (Berg, Dickhaut, & McCabe, 1995). In the reference treatment there is no reputation mechanism at all, in treatment 1 trustees can build up a direct reputation, and in treatment two players can build up a direct reputation for both roles. We find that trustees’ direct reputation has a positive effect on reciprocity, but does not affect the average trust in the population. Trust is significantly higher only when players can build up a reputation in both roles. We show that the increase in trust is mainly linked to the formation of mutual trust-reciprocity relations.     

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).     

Conceptualizing trust: a holistic Chinese view to bridge divergences and dichotomies

This research study seeks to understand and describe how people in a Chinese society define trust in daily life. Employing a qualitative phenomenological method, data were obtained through in-depth interviews with 14 adult Chinese individuals in northern Taiwan. This research pinpoints prior misconceptions of trust, examines competing approaches to trust that have led to diverse definitions, adopts a holistic Chinese view of trust that bridges prior divergent views, mediates the agency-structure and trust-distrust dichotomies, and focuses on trust strategies applicable to different situations. The findings reveal that trust is a dyadic relationship in which how the trustee demonstrates his or her trustworthiness to gain trust and how the trustor decides to trust are likely to be affected not only by personal choices based on prior knowledge and experiences but also the external social and cultural norms of the society. The findings advance the existing knowledge of trust conceptualization and extend its applicability to broader Chinese societies. They have implications for strategies for relationship and trust-building for Westerners as they engage in global socio-economic discourse with Chinese.     

Somebody may scold you! A dictator experiment

In this contribution, we investigate the effects of observation-only and observation with feedback from a third-party in a one-shot dictator game (DG). In addition to a baseline condition (DG), a third-party anonymous subject was introduced who either silently observed or observed and got to give feedback by choosing one of seven messages consisting of varying degree of (dis)satisfaction. We found that observation coupled with feedback increased significantly dictators’ propositions, while no significant effect is found for observation-only. We conclude that regard by others matters only if it linked to social factors such as communication. This complements the literature arguing that altruistic behavior is instrumental in serving other selfish (or non-purely altruistic) ends such as self-reputation or social approval. This experiment also contributes to the growing literature that aims at decreasing the artificiality of dictator game designs by increasing their practicability and external validity.     

Losses Disguised as Wins Affect Game Selection on Multiline Slots

Multiline slots are exciting games that contain features which make them alluring. One such feature is a loss disguised as a win (LDW); wherein, players win less than they wager (e.g., bet 2 dollars, win back 50 cents), but this net loss is disguised by flashing graphics and winning sounds. Research to date concludes that LDWs are both rewarding and reinforcing. Here, we investigated whether LDWs affect players’ game selection. Thirty-two undergraduate students with experience playing slot machines played 100 spins on four games—two had positive payback percentages (115%) and two had negative payback percentages (85%) after 100 spins. For each payback percentage condition, there was a game with no LDWs and a game with a moderate number of LDWs. For the 100 spins, players could choose to play whichever game they wished. They then rated their preference for each game following the 100-spins and chose a game to continue playing. The majority of players preferred playing the positive payback percentage game with LDWs and chose to continue playing this game over the three other games. We conclude that in addition to LDWs being reinforcing and rewarding, LDWs do in fact influence game selection. We conclude that responsible gambling initiatives should educate players about LDWs.     

The social capital crash in the periphery:: An analysis of the current predicament in sub-Saharan Africa

Purpose: The current literature on social capital, especially among sociologists and political scientists, is characterized by a focus on its “civic” nature and consequently on the role that virtuous behavior plays in fostering democracy and national development. Robert Putnam’s book on the significance of the civic tradition in understanding Italy’s political history has set the tone for a new genre of literature on development. It is now being replicated, for example in the international development community, where the search for answers to the question of what explains a society’s progress continues. Efforts to operationalize social capital in order to achieve quantitative measures of its impact are also made in these circles.The notion that social capital is made up of a common currency of civicness, however, is both ethnocentric and misleading for policy or governance purposes. Social capital being manifest in the presence of trust and the existence of social networks and operationalized in collective action, which implies the confidence in sharing information and risks with others, may arise for reasons other than those associated with solving public problems arising from the competitive private interests of autonomous individuals, which is the prevailing assumption of the rational choice-based theory that now dominates the literature. There are at least three other reasons for the formation of social capital if the concern is analyzing its role in developing country contexts. The first is class solidarity growing out of a common sense of being exploited. This has historically been viewed as a cause for collective action. The second is the “moral economy” argument put forward by James Scott: people whose traditional values are being threatened by modernization get together to defend these values. The third is cooperation that emanates from the presence of strong communal ties, which help foster the development of a para-public realm, often in conflict with the norms underpinning the civic public realm. In short, there are several competing currencies of social capital that influence people’s readiness to engage in collective action.Which of these types of collective action people prefer and the extent to which they engage in any one of them is very much determined by the history of previous efforts to form social capital. Whether these efforts were successful or not will have an impact on the strategies that individuals choose next time around. Investments in social capital, therefore, are driven by the same considerations that influence behavior and choice in the financial marketplace. Social capital is based on the notion that something is being obtained in return for a gesture of goodwill. It takes a reciprocal effort to sustain it. If mutuality is lost, so is the trust that was being built with the initial act of goodwill. Trust, once destroyed, is difficult to rebuild; hence the significance not only of forming such capital, but also its ruin. Above all, social capital is by nature exclusive, i.e. it cannot incorporate everybody. It is often being fostered in the context of conflict. In short, social capital is not easily engineered by outsiders. It has to grow organically from the social dynamics that characterizes society.The purpose of this paper is to provide an alternative explanation of the societal predicament of sub-Saharan African countries to those that have relied primarily on economic and/or structural variables. Using social capital as the dependent variable, it examines what forces produce social capital, what type of it prevails, and which group in society is more inclined towards one type rather than others. Empirical data were collected in Tanzania in 1990 from four different groups—commercial farmers, village farmers, peri-urban entrepreneurs and women groups—all of which are viewed as important players outside the state.Methods: The study shows that commercial farmers are the only group of respondents who display a civic approach towards solving problems facing them. They are driven to collective action by a genuine concern with policy issues and the need to deal with them in a rational fashion. They demonstrate an internal strength that is unparalleled in the other groups. Women groups show great internal solidarity, but their motive for joint action is largely driven by moral economy considerations, that is, the desire to protect or enhance traditional values. Moreover, their activities tend to be confined to very elementary livelihood issues and thus have little impact on the nature of the public realm. Village farmers, and to a lesser extent, peri-urban entrepreneurs, are primarily motivated by communal considerations, but unlike the other two groups, they display much less trust in each other. There is a serious crisis of confidence in the value of collective action among both village farmers and peri-urban entrepreneurs, but this does not mean that they are transcending communal loyalties in favor of some other type of collective action. On the contrary, they refrain from any collective action and prefer to act on their own to solve problems, many of which cannot be dealt with on such a basis.In explaining this loss in social capital that is so prevalent among groups that could play a crucial role in national development it is necessary to understand the political legacy that they are coping with. Policies that took away the spirit of self-reliance and self-help that was so prominent before and at independence among groups at both national and local levels by emphasizing the need for a centralized control of resource allocation and thus the preemption of voluntary action are according to respondents largely responsible for the destruction of social capital in Tanzania. The loss in Tanzania is a double one. It is not only the formal institutions which have collapsed but so have the informal networks that in many other countries may serve as a substitute to facilitate collective action. It is clear that the loss of trust in the Tanzanian countryside and its urban fringes has produced a general decline in social capital both at the micro and macro level. Individuals do not trust their neighbors to engage in solving many problems that are of a common nature. They instead rely on their own limited resources, typically what may be possible to mobilize within a narrow family setting. These resources are typically inadequate and problems of a common and public nature in the field of health, education and infrastructure remain unsolved. At the societal level there is a more generalized loss of social capital, which expresses itself in terms of a broad suspicion towards government as well as other modernizing institutions. Religious institutions which are often viewed as alternative trustworthy institutions and thus potentially of value for local development purposes have lost much of their public role. Instead, people flock to the “new” churches, often evangelical or prophetic institutions where salvation is being sought in an escapist manner. In sum, the negative externalities produced by the loss of trust in institutions and among people in Tanzania are very serious and are likely to be at the root of the country’s predicament as the only country in the world which without experiencing war, epidemics or a financial crash has plunged from being economically relatively well-off to being one of the world’s five poorest nations.Results: This study has important policy implications for what kind of “interventions” outside agencies or domestic actors in Tanzania may take. It is clear that the only group with enough internal strength to make a difference are the commercial farmers, who articulate a very “civic” outlook and reflect the type of rational calculations that we associate with game theoretic reasoning. Even if augmented with other members of the middle class, however, this group is quite small and it is difficult to see that it can carry the burdens of their country on their shoulders alone. Furthermore, if they were to become politically more active, they may easily be tainted by the “patrimonial” type of politics that still dominates Tanzania (and many other countries). Nonetheless, the commercial farmers have a potentially important contribution to make to economic development in the country. The marginalization of women means that human and social capital in the country is being wasted or misused. Greater efforts must be made to enhance the access that women have to public resources and to participation in public affairs.The loss of trust in both formal and informal institutions means that Tanzania poses an interesting challenge in terms of where to start rebuilding social capital. Accepting that it will not be an easy task, it may be that the weakness of informal networks provides an opportunity for giving priority attention to building up formal institutions that can make a difference. The judiciary is a case in point. Its upper echelons are already quite reliable and trusted, but its lower level judges are still easily corrupted and often operating in a manner that is detrimental to the cause of rule of law. To ensure a fairer resource allocation it may also be necessary to consider establishing alternative mechanisms to those controlled by the executive, because government operations tend to be based solely on patronage considerations. The model of autonomous development funds that is now being promoted in various African countries that supplement government expenditures is of special relevance in the current situation in countries like Tanzania.Conclusion: In conclusion, this paper draws attention to the need for acknowledging that games that people play are not only explained in conventional prisoner dilemma terms but need to be extended to consideration of games where the basis for choice is not only cognition but affection. Games based on affection tend to be exclusively zero-sum games, which ruin social capital much more quickly than cognitive games that offer the prospect of a positive-sum end to the game. Much of Africa’s societal predicament, therefore, can be explained with reference not only to social capital in general terms but also to the particular type of social capital that prevails and the type of “game” it gives rise to as people interact to deal with issues facing them as common problems. Especially problematic in Africa is that affective games are very inefficient in resolving disputes within groups or organizations. The notion of tit-for-tat that can be turned into a positive-sum game in the context of cognition-based or rational types of prisoners’ dilemma situations typically leads to either confrontation or withdrawal in the case of affective games. The tit-for-tat remains a pure zero-sum game where “retreat-for-tat” is often preferred as a way of avoiding embarrassment. As political scientists and sociologists are striving to strengthen the theoretical core of their respective disciplines, the presence of games that are played on a different bases than those conventionally modeled in game theory provides a challenge that at least those who are interested in comparative studies cannot escape.     

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.     

WARM‐GLOW GIVING: EARNED MONEY AND THE OPTION TO TAKE

Giving in dictator games has been shown to vary with the nature of the endowment (earned vs. house money) and the action space (give only vs. the option to give or take). This article is the first to test if these factors similarly affect warm‐glow giving alone. There is no reason that one would expect the same outcomes given that the motivations for warm‐glow giving are different from the motivations for total (warm‐glow plus purely altruistic) giving. We find that warm‐glow giving to charity or philanthropic institutions in a real‐donation experiment increases when the endowment is earned. The option to take does reduce warm‐glow giving to charity, but significant giving remains. Our results suggest that donating earned income creates greater utility than donating an equal amount from a windfall gain, and that warm glow comes not merely from the act of giving, but also from the characteristics of the recipient. (JEL C90, D64, H41)