INVESTMENT CHOICE ARCHITECTURE IN TRUST GAMES: WHEN “ALL‐IN” IS NOT ENOUGH

While many economic interactions feature “All‐or‐Nothing” options nudging investors towards going “all‐in,” such designs may unintentionally affect reciprocity. We manipulate the investor's action space in two versions of the “trust game.” In one version investors can invest either “all” their endowment or “nothing.” In the other version, they can invest any amount of the endowment. Consistent with our intentions‐based model, we show that “all‐or‐nothing” designs coax more investment but limit investors' demonstrability of intended trust. As a result, “all‐in” investors are less generously reciprocated than when they can invest any amount, where full investments are a clearer signal of trustworthiness. (JEL C72, C90, C91, D63, D64, L51)     

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.     

IS THERE RECIPROCITY IN A RECIPROCAL‐EXCHANGE ECONOMY? EVIDENCE OF GENDERED NORMS FROM A SLUM IN NAIROBI,KENYA

Norms of reciprocity help enforce cooperative agreements in bilateral sequential exchange. We examine the norms that apply in a reciprocal-exchange economy. In our one-shot investment game in a Nairobi slum, people adhered to the norm of "balanced reciprocity," which obligates quid-pro-quo returns for any level of trust. The norm is gendered, with people more likely to comply when confronted with women rather than men, and differs from "conditional reciprocity," prevalent in developed countries, according to which greater trust is rewarded with proportionally larger returns. Balanced reciprocity produces less trust and trustworthiness and smaller gains from trade than conditional reciprocity. ( JEL C72, C91)     

BELIEFS ABOUT OTHER-REGARDING PREFERENCES IN A SEQUENTIAL PUBLIC GOODS GAME

Experimental evidence is used to deduce players' beliefs about their opponents' concern for others. The experiment is a sequential public good provision game with a provision point and two different refund rules. A theory is constructed to show how early contributions should change with the refund rule depending on the first mover's beliefs about subsequent players' other-regarding preferences. The evidence rejects the hypothesis that early players believe that their opponents are inequality averse and also rejects the hypothesis that early players are concerned with security. The evidence is consistent with beliefs in spite, reciprocity, or a concern for security. (JEL H41 , C90 , D63 , D64 )     

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.     

FOOLING MYSELF OR FOOLING OBSERVERS? AVOIDING SOCIAL PRESSURES BY MANIPULATING PERCEPTIONS OF DESERVINGNESS OF OTHERS

We present a novel experiment demonstrating strategies selfish individuals utilize to avoid social pressure to be altruistic. Subjects participate in a trust game, after which they have an opportunity to state their beliefs about their opponent's actions. Subsequently, subjects participate in a task designed to “reveal” their true beliefs. Subjects who initially made selfish choices falsely state their beliefs about their opponent's kindness. Their “revealed” beliefs were significantly more accurate, which exposed subjects' knowledge that their selfishness was unjustifiable by their opponent's behavior. The initial false statements complied with social norms, suggesting subjects' attempts to project a more favorable social image. (JEL C9, D03, D83)     

REPRESENTATIVE TRUST AND RECIPROCITY: PREVALENCE AND DETERMINANTS

This paper provides evidence about the determinants of trust and reciprocal inclinations, that is, a tendency for people to respond in kind to hostile or kind actions, in a representative setting. We investigate the prevalence of reciprocity in the population, the correlation between trust and positive and negative reciprocal inclinations within person, the individual determinants of reciprocity, and the relationship with psychological measures of personality. We find that most people state reciprocal inclinations, in particular in terms of positive reciprocity, as well as substantial heterogeneity in the degree of trust and reciprocity. Trust and positive reciprocity are only weakly correlated, while trust and negative reciprocity exhibit a negative correlation. In terms of determinants, being female and increasing age are associated with stronger positive and weaker negative reciprocal tendencies. Taller people are more positively reciprocal, but height has no impact on negative reciprocity. Psychological traits also affect trust and reciprocity. ( JEL D63, J3, J6)     

‘We,the Congolese,we cannot trust each other’. Trust,norms and relations among traders in Katanga,Democratic Republic of Congo1

Congolese traders in Katanga claim that they cannot trust their peers, customers, and employees. Existing literature about social capital in Africa does not enhance our understanding, as it tends to consider trust as depending on the degree of social knowledge. In the Congo, social proximity does not exclude suspicion, nor does social distance necessarily prevent trust. Based on ethnographic fieldwork, this article aims at developing a more detailed framework. It studies how Congolese traders negotiate two key norms for the building of economic trust – property and reciprocity – with non‐relatives, distant relatives, and close relatives.     

Developmental Changes and Individual Differences in Trust and Reciprocity in Adolescence

A Trust Game was used to examine trust and reciprocity development in 12–18‐year‐old‐adolescents (N = 496), as findings have been conflicting and transitions in adolescence remain elusive. Furthermore, this study tested the roles of gender, risk, and individual differences in empathy, impulsivity, and antisocial tendencies in trust and reciprocity. Results indicate stability in trust and a decrease in reciprocity across adolescence, but also show that trust and reciprocity choices were influenced by risk, and that empathy mediated the age‐related decrease in reciprocity. Males trusted more than females, but there were no gender differences in reciprocity. These findings highlight the importance of considering individual differences and adolescents’ sensitivities to varying contexts in explaining trust and reciprocity development in adolescence.     

Individual Stress,Collective Trauma,and Social Capital in the Wake of the Exxon Valdez Oil Spill*

This article examines persistent social impacts of the 1989 Exxon Valdez oil spill (EVOS) by focusing on the relationship between social capital and chronic individual stress and collective trauma, using Hobfoll’s (1988) conservation of resources model of stress as an organizing framework. Data are based on in‐depth personal interviews conducted 14 years after the disaster. Analyses focus on the ways in which stress‐related behaviors associated with loss and threat of loss of various forms of resources have affected social capital in the renewable resource community of Cordova, Alaska. Findings reveal lower levels of trust, disruptions in associations, weakened social connections and networks, altered social discourses, diminished feelings of good will, and violations of norms of reciprocity. Behaviors associated with long‐term stress related to the EVOS and to the associated protracted litigation are indicative of diminished social capital. This research highlights the critical importance of social capital as a collective resource and illustrates the ways in which decreased social capital can exacerbate individual stress and collective trauma.     

ENDOWMENTS,PERCEIVED SIMILARITY,AND DICTATOR GIVING

A common assumption of money is that it is fungible. An implication of this assumption is that the source of money does not affect economic decision making. We find evidence contradicting this fungibility assumption. Specifically, we explore how the perception of an endowment source influences amounts sent in a dictator game. We find perceived similarity to the endowment provider to be negatively correlated with dictator offers. Dictators who consider themselves relatively more similar to their endowment provider send significantly smaller amounts to their partners. Our results demonstrate that economic decision making can be influenced by the provider of income shocks. (JEL C78, C91, C99, D31, D64, D74)     

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.     

PERCEIVED GAME UNCERTAINTY,SUSPENSE AND THE DEMAND FOR SPORT

This study tries bridging between different behavioral economic explanations for the lack of support of the uncertainty of outcome hypothesis in spectator sports. We test a measure of perceived game uncertainty that is comparable to objective measures frequently tested in the literature. Econometric results suggest that fans do not perceive closeness of a game differently than how economists have tended to measure it. However, fans' perceptions of suspensefulness are distinct from their perceptions of game uncertainty. Moreover, the finding that fans' preferences for game uncertainty are dominated by loss aversion also emerges—independently of fanship status—in our stated‐preference setting. (JEL L83, D12, Z2)     

LIMITED LIABILITY,MORAL HAZARD,AND RISK TAKING: A SAFETY NET GAME EXPERIMENT

We model the safety net problem as a social dilemma game involving moral hazard, risk taking, and limited liability. The safety net game is compared to both an individual decision task involving full liability and the deterministic public goods game. We report experimental data to show that limited liability leads to higher risk taking in comparison to full liability; nevertheless, the difference is much smaller than predicted by theory. In the safety net game, subjects behave as if socially responsible for the losses they impose on the group. With repetition, nevertheless, a gradual emergence of the moral hazard problem arises. (JEL C9, D7, D8, H4, I1, I3)     

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.     

“Trust Me”: Differences in expressed and perceived trust relations in an organization

The possibility of resolving the tension between trust as a psychological condition and trust as a general organizing principle depends on assumptions about the convergence of expressed and perceived trust relations. In empirical organizational research these assumptions are frequently left implicit and only rarely modeled directly. Using data that we have collected on trust relations within the top management team of a multiunit industrial group we specify and estimate multivariate exponential random graph models (ERGMs) that reveal important differences in the structural logics underlying networks of expressed and perceived trust relations. Results confirm that trust induces awareness and produces expectations of reciprocity – features that are consistent with the view of trust as a general organizing principle. Results also show that networks of perceived trust relations are characterized by tendencies toward reciprocity and generalized giving of trust. When multivariate network effects are introduced, however, expressed trust relations no longer show a significant tendency toward reciprocation. Interpreted together these results suggest that: (i) the distribution of expressed and perceived trust relations differs; (ii) expressed trust relations in organizations are more hierarchical than are perceived trust relations, and (iii) expressed and perceived trust relations need to be modeled jointly. These findings suggest caution in the adoption and interpretation of trust only as a general organizing principle, and suggest that psychological mechanisms also play an important role in the making and breaking of trust relations within organizations.     

QUALITY DIFFERENCES,THIRD‐DEGREE PRICE DISCRIMINATION,AND WELFARE

We propose a model with two markets to analyze the welfare implications of price discrimination with quality differences. In each market a local firm that operates in that market only competes against a global firm that operates in both markets. Local firms produce higher‐quality goods than the global firm. If the quality levels of the local firms' products are the same, price discrimination is never welfare‐decreasing. If they differ, discrimination is welfare‐increasing if quantity increases. Because of a positive allocation effect of price discrimination, there are parameter values such that welfare increases while total output decreases with price discrimination. (JEL D43, D60)     

Immigrants’ TANF Eligibility, 1996–2003: What Explains the New Across‐State Inequalities?1

Why did some states adopt stringent TANF‐eligibility policies toward immigrants, while others implemented more lenient rules throughout the post‐1996 welfare reform period? We use immigrant‐specific welfare rule measures to examine predominant theoretical frameworks for understanding state stringency in welfare policy. Analysis, utilizing a simultaneous equations modeling (SEM) strategy, uses annual data for all states. Results show consistent support for the median voter (primarily, the percent of liberal voters) theoretical explanation for less stringent state welfare eligibility rules regarding immigrants. While the size of the Social‐Security‐recipient population (tax capacity indicator) and perhaps unacceptable reproductive behavior (teen birth rate) relate to more stringent rules, key state economic and fiscal characteristics (i.e., per capita welfare expenditures, per capita personal income) explain less stringent TANF eligibility rules. Importantly, recent immigrant population concentration patterns (in new and traditional destination states) add to the theoretical explanation of less stringent state TANF immigrant eligibility policies.     

Incentivising trust

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, Cobo-Reyes, and Jimenez (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.     

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.