Third-Party Effects on Trust in an Embedded Investment Game (original) (raw)
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Embedded trust: an experiment on learning and control effects
2009
The paper discusses a laboratory experiment in which pairs of trustors play finitely repeated Trust Games with the same trustee. We study trustfulness of the trustors as well as trustworthiness of the trustee. We distinguish between learning and control effects on trustfulness and trustworthiness. Learning effects are related to an actor's information on past behavior of the partner. Control effects are related to opportunities for sanctioning a trustee in future interactions. The experiment includes two conditions that represent different types of "embeddedness" of Trust Games. In one condition, each trustor only knows what happens in her own games with the trustee. In the other condition, each trustor also knows what happens in the games of another trustor with the trustee. Thus, with respect to trustfulness of the trustor, the design allows for disentangling learning effects from own experience of the trustor with the trustee and learning effects through third-party information, i.e., information on experiences of the other trustor with the trustee. Also, the design allows for disentangling control effects on trustfulness and on trustworthiness through own sanction opportunities of the trustor and through opportunities for third-party sanctions, i.e., sanctions implemented by the other trustor.
An experiment on the effects of embeddedness in trust situations
Rationality and Society, 2000
This article describes a vignette experiment on the effects of temporal embeddedness and network embeddedness in trust situations. The experiment uses a setting in which a buyer wants to buy a used car from a car dealer. We distinguish between effects on trust of the past relation and the effects of the expected future relation between the buyer and the dealer. A buyer can learn about the trustworthiness of the dealer from past transactions of the dealer. Moreover, the buyer can control the dealer if the buyer and the dealer expect more transactions in the future, because the buyer may sanction the dealer if the dealer would act untrustworthy in the present transaction, for example, by refraining from future transactions. Temporal embeddedness facilitates learning and control through the bilateral relation of the buyer and the dealer, while network embeddedness facilitates learning and control through third parties. In the experiment, subjects are asked to compare different settings for buying a used car, while the relation between the buyer and dealer is varied in these settings. We conclude that both learning and control affect trust at the level of the dyad (temporal embeddedness) as well as at the group-level (network embeddedness).
Discriminating strategic reciprocity and acquired trust in the repeated trust-game
2011
In repeated trust-game offers made by investors can be attributed to strategic reciprocation-based behavior. However, when a trustee is loyal, personal trust can build up between players, in the same way that lack of positive reciprocation on the part of trustees can motivate investors' distrust. Acquired personal trust or distrust and strategic reciprocation of the opponent's offers have then a cumulative and convergent influence on behavior in the trust game and are not prima facie distinguishable. We propose an experimental protocol which discriminates between these two determinants of trust. We furthermore show that acquired trust is the mere outcome of anonymous repeated interactions taking place during the experiment in the sense that it does not co-vary with an initial and independent baseline disposition to trust among investors: acquired trust crowds out background trust. Moreover, offers are sensitive to the amount and variance of trustees' returns. High ret...
Intermediaries in Trust: An Experimental Study on Incentives and Norms
Trust situations involve a certain amount of risk for trustors that trustees can abuse. Knowing this, rational individuals might not place trust in others. In many real situations, intermediaries exist that play a crucial role helping trustors and trustees to cooperate. The question is how intermediaries can be motivated to accomplish this important task. We have investigated this by performing various experimental tests on a modified version of the investment game, where we introduced intermediaries who rated the behavior of trustees for the benefit of trustors. We manipulated incentive schemes and tested various role structures. We found that intrinsic motivations can increase the positive impact of the intermediaries on cooperation between trustors and trustees, even more than any material incentive, provided that there is room for indirect reciprocity strategies. Our results show the importance of intrinsic motivations of individuals and circumscribe the power and generalizability of material incentives for cooperation.
SSRN Electronic Journal, 2000
We analyze the phenomenon of gradual increase of stakes in bilateral social interactions in the context of a repeated game with two-sided incomplete information. The underlying stage-game resembles properties of a "Continuous Prisoner's Dilemma" with a continuous action space plus the possibility of stealing the opponent's investment. The continuous investment variable corresponds to cooperation and is interpreted as individual level of trust while the defective action is interpreted as break of trust which terminates the partnership. Players can be of two different types/discount factors. We analyze the structure of efficient equilibria and characterize the Pareto frontier of types' payoffs. Efficient equilibria are shown to display a typical pattern consisting of three phases. First, in the Communication Phase information about the respective opponent's type is transmitted, after which in the Adjustment Phase stakes grow over time until in the Established Phase partners behave stationary as under complete information. The efficient adjustment of stakes is governed by the impatience of the low type. Furthermore, we demonstrate that in some equilibria all players do strictly better than in a corresponding game with complete information.
Trust and Trustworthiness as a Behavioural Social Norm 1
2011
Trust and Trustworthiness as a Behavioural Social Norm. We present the results of a trust investment game performed with university students in Slovakia. We discuss the social norms of the participants of our experiment, notably the notions of trust and reciprocity. By analyzing the one-shot version of the game, as well as the case of a repeated game with unspecified number of repetitions, we also show a dependence on outcome of the prior rounds (hence the learning effect) and provide a possible explanation for the choice of behaviour strategies observed in our sample. Sociologia 2011, Vol. 43 (No 3: 242-265)
AN EXPERIMENT ON THE EFFECTS OF EMBEDDEDNESS IN TRUST SITUATIONS: BUYING A USED CAR
Rationality and Society, 2000
This paper describes a vignette experiment on the effects of temporal embeddedness and network embeddedness in trust situations. The experiment uses a setting in which a buyer wants to buy a used car from a car dealer. We distinguish between effects on trust of the past relation and the effects of the expected future relation between the buyer and the dealer. A buyer can learn about the trustworthiness of the dealer from past transactions of the dealer. Moreover, the buyer can control the dealer if the buyer and the dealer expect more transactions in the future, because the buyer may sanction the dealer if the dealer would act untrustworthy in the present transaction, for example, by refraining from future transactions. Temporal embeddedness facilitates learning and control through the bilateral relation of the buyer and the dealer, while network embeddedness facilitates learning and control through third parties. In the experiment, subjects are asked to compare different settings for buying a used car, while the relation between the buyer and dealer is varied in these settings. It turns out that learning as well as control based on temporal as well as network embeddedness contribute to the extent to which the buyer trusts the dealer.
Whatever you say, your reputation precedes you: Observation and cheap talk in the trust game
Journal of Public Economics, 2009
Behavior in trust games has been linked to general notions of trust and trustworthiness, important components of social capital. In the equilibrium of a trust game, the investor does not invest, foreseeing that the allocator would keep all of the returns. We use a human-subjects experiment to test the effects of changes to the game designed to increase cooperation and efficiency. We add a pre-play stage in which the investor receives a cheap-talk message from the allocator, observes the allocator's previous decision, or both. None of these changes alter the game's theoretical predictions. We find that allowing observation results in substantially higher cooperation and efficiency, but cheap talk has little effect.
Distinguishing trust from risk: An anatomy of the investment game
Journal of Economic Behavior & Organization, 2010
The role of trust in promoting economic activity and societal development has received considerable academic attention by social scientists. A popular way to measure trust at the individual level is the so-called "investment game" (Berg, Dickhaut, and McCabe, 1995). It has been widely noted, however, that risk attitudes can also affect decisions in this game, and thus in principle confound inferences about trust. We provide novel evidence, shedding light on the role of risk attitudes for trusting decisions. To the best of our knowledge, our data are the first rigorous evidence that (i) aggregate investment distributions differ significantly between trust and risk environments, and (ii) risk attitudes predict individual investment decisions in risk games but not in the corresponding trust games. Our results are convergent evidence that trust decisions are not tightly connected to a person's risk attitudes, and they lend support to the "trust" interpretation of decisions in investment games.
Trust and trustworthiness in networked exchange
This paper focuses on the interaction between network structure, the role of information, and the level of trust and trustworthiness in 3-node networks. We extend the investment game with one Sender and one Receiver to networked versions -one characterized by one Sender and two ) and one characterized by two Senders and one Receiver ([2s-1r]) -under two information conditions, full and partial. We develop a comparative model of trust for the networked exchange environments and generate two hypotheses: