Expectations of Fairness and Trust Co-Evolve in Environments of Partial Information (original) (raw)
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Intentionality Matters for Third-Party Punishment but not Compensation in Trust Games
Journal of Economic Behavior and Organization , 2022
We investigate how the intentionality of investors or trustees' actions affects third party compensation and punishment interventions after a trust game. Investors and trustees are randomly assigned to conditions where they either make intentional choices or their choices are made by a random machine. Overall, we find that lack of reciprocity is punished more than lack of trust, and third parties exhibit strong preferences for compensation over punishment. We find that only the punishment choice is affected by the intentionality of parties' actions, whereas compensation occurs in all conditions, whether lack of trust or reciprocity has been intentional or unintentional.
Trust and trustworthiness reputations in an investment game
2011
Trust is an essential component of good social outcomes and effective economic performance. This is particularly true in environments such as the Prisoner's Dilemma or standard public-goods games, where the equilibrium in a one-shot case involves strictly uncooperative behavior. Evolutionary biologists have developed the notion of indirect reciprocity, whereby favorable or unfavorable actions by one person towards a second person are rewarded or punished by a third party. In this view, indirect reciprocity is a strategic notion based on reputation and is sustainable in an evolutionary sense. In this paper, we study the effect of different reputation systems. In the History of Return treatment, we make information available to the first mover in a binary 'trust' game about the past behavior of the responder as a responder. In the novel History of Trust treatment, we alternatively make information available about the behavior of the responder as a first mover. We find an identical and substantial increase in 'trust' for both of these reputation systems in comparison to the baseline noinformation treatment, even though 'trustworthiness' is relatively low in the History of Trust treatment. Thus, people still find it worthwhile to invest in reputation as someone who is willing to trust, even though the immediate payoff for trusting is poor.
Why trust out-groups? The role of punishment under uncertainty
Journal of Economic Behavior & Organization, 2018
We conducted a hidden-effort trust game, in which we assigned subjects to one of two groups. The groups, which were formed through two different group formation processes, included a "social" group that required sharing and exchange among its members, and a "non-social" group that did not. Once assigned, subjects participated in the game with members from both groups, either with or without the opportunity to punish a trustee who may have defected on them. We found that for investors in the non-social group, the opportunity to punish a trustee worked to promote trust, but only when the trustee was a member of the other group. For the social group, the opportunity to punish had no effect on the investors' trust decisions, regardless of the trustee's group. We provide a theoretical framework to explain this asymmetric effect of punishment on trust. Our results suggest that groups with identities founded in sharing and exchange-a feature of globalized societies-may find it less necessary to engage in costly punishment. As a result, they may enjoy gains in economic efficiency.
Increases in trust and altruism from partner selection: Experimental evidence
Experimental Economics, 2008
This paper examines how selection affects trust and altruism in a Trust and Modified Dictator Game. Past Trust and Dictator game experiments not allowing partner selection show substantially more trust and altruism than equilibrium predicts. We predict partner selection will cause sorting in which behavior across partner types without selection will be positively correlated with partner choice. This selection pattern will cause trust and altruism to be higher with selection and the increase will be proportional to a maximum possible gain. We find selection has all these effects. We also find greater gains in the Trust than Modified Dictator game consistent with larger possible gains in the Trust game. The results imply that theories ignoring selection will underestimate trust and altruism in markets with selection.
It takes two to cheat: An experiment on derived trust
European Economic Review, 2013
Social life offers innumerable instances in which trust decisions involve multiple agents. Of particular interest is the case when a breach of trust is not profitable if carried out in isolation, but requires an agreement among agents. In such situations the pattern of behaviors is richer than in dyadic games, because even opportunistic trustees who would breach trust when alone may act trustworthily based on what they believe to be the predominant course of action. Anticipating this, trusters may be more inclined to trust. We dub these motivations derived trustworthiness and derived trust. To capture them, we design a "Collective Trust Game" and study it by means of a laboratory experiment. We report that overall levels of trustworthiness are almost thirty percentage points higher when derived motivations are present, and this generates also higher levels of trust. In our set-up, the effects of derived trustworthiness are comparable in size to positive reciprocity, and more important than concerns for equality.
Effects of Financial Incentives on the Breakdown of Mutual Trust
Psychological Science, 2002
Disagreements between psychologists and economists about the need for and size of financial incentives continue to be hotly discussed. We examine the effects of financial incentives in a class of interactive decision making situations, called centipede games, in which mutual trust is essential for cooperation. Invoking backward induction, the Nash equilibrium solution for these games is counterintuitive. Our previous research showed that when the number of players in the centipede game is increased from two to three, the game is iterated in time, the players are re-matched, and the stakes are unusually high, behavior approaches equilibrium play. Results from the present study show that reducing the size of the stakes elicits dramatically different patterns of behavior. We argue that when mutual trust is involved the magnitude of financial incentives can induce a considerable difference.
Journal of Institutional and Theoretical Economics, 2007
Standard economic explanations of good conduct in trade rely almost exclusively on future-directed extrinsic motivations induced by material incentives. But intrinsic motives to behave trustworthy and to punish untrustworthiness do support trade. In our model, intrinsically motivated players are aware of their own type and observe the population share of other types. The material success of various types and their co-evolution are analyzed, and it is checked whether the dynamics of the indirect evolutionary analysis are replicated in the laboratory.
The efficient interaction of indirect reciprocity and costly punishment
Nature, 2006
Human cooperation in social dilemmas challenges researchers from various disciplines. Here we combine advances in experimental economics and evolutionary biology that separately have shown that costly punishment and reputation formation, respectively, induce cooperation in social dilemmas. The mechanisms of punishment and reputation, however, substantially differ in their means for 'disciplining' non-cooperators. Direct punishment incurs salient costs for both the punisher and the punished, whereas reputation mechanisms discipline by withholding action, immediately saving costs for the 'punisher'. Consequently, costly punishment may become extinct in environments in which effective reputation building-for example, through indirect reciprocity-provides a cheaper and powerful way to sustain cooperation. Unexpectedly, as we show here, punishment is maintained when a combination with reputation building is available, however, at a low level. Costly punishment acts are markedly reduced although not simply substituted by appreciating reputation. Indeed, the remaining punishment acts are concentrated on free-riders, who are most severely punished in the combination. When given a choice, subjects even prefer a combination of reputation building with costly punishment. The interaction between punishment and reputation building boosts cooperative efficiency. Because punishment and reputation building are omnipresent interacting forces in human societies, costly punishing should appear less destructive without losing its deterring force.
How Does Being Trusted Affect Sharing? Findings from the Ultimatum Game
Ege Academic Review, 2023
Individual personalities, situational factors, and social interactions impact the fair sharing of justice. This study was conducted on 412 adults and investigated how behaviors were shaped in the Ultimatum Game. Therefore, three cases were determined, and the bidder was instructed to divide 10 thousand TL first in the typical game. Afterward, it was said that the other person was in need, and the bid was requested to be renewed. At the last stage, bids were received if there was any doubt about the needy. Consistency analysis was performed with the Cronbach's Alpha Reliability Coefficient for the reliability. It was found that the scales used in the test were consistent. According to the typical game, people are more empathetic towards those in need and offer 6667 TL rather than 4264 TL. However, when a question of reliability is raised, 4658 TL is offered regardless of need. The study also found that women made higher offers to people in need than men. There was no statistical difference between the bids when the age range and graduation level differed. The findings show that the neoclassical economics concept of homo economicus, which seeks to maximize utility, is not valid in real life.