The Impact of Payoff Interdependence on Trust and Trustworthiness

Abstract. In one‐shot investment games where each player's payoff is a convex combination of own and other's profit, we measure trust by the amount given to the trustee and trustworthiness by the amount returned to the trustor by the trustee. Does the degree of payoff interdependence increase both trust and trustworthiness or one but not the other or neither of them? According to our experimental data, trust remains unaffected by the extent of interdependence whereas trustworthiness reacts positively to it.     

身份与信任*——基于干部身份的实验证据

本文设计了由中国大学生被试作为委托人和受托人的投资实验,通过在实验中“泄露”不同完备和对称程度的信息,检验了在“无信息”、“单向信息”和“双向信息”三种不同的环境下,“学生干部”这一社会身份对“信任”和“值得信任”水平的影响。研究发现：首先,多数中国学生被试之间存在着彼此信任和值得信任,这使得双方实现了“双赢”。其次,受托人的干部身份,招致了委托人更高的可信任度;但干部在其身份信息不公开时,并不比无信息状态下的受托人更值得信任。再次,双向信息的干部身份可以显著提升干部的互利性,使得他们比无信息状态下的受托人有着更高的值得信任的水平。     

Learning to trust in indefinitely repeated games

Although it is well known that trust and trustworthiness (i.e., the fulfillment of trust) are important behaviors for the fulfillment of incomplete contracts, less is known about how the economic environment influences them. In this paper we design an experiment to examine how exogenously determined (stochastic) past relationship lengths affect trust and trustworthiness in new relationships. We find that shorter-lasting relationships have an immediate negative impact on both behaviors in the relationships that immediately follow, while longer-lasting relationships have the opposite effect. The effect of stochastic end-points declines for trustworthiness but not for trust as subjects gain experience, indicating that trust is able to rebound when longer-lasting relationships follow shorter-lasting ones.     

Promises and lies: can observers detect deception in written messages

We design a laboratory experiment to examine predictions of trustworthiness in a novel three-person trust game. We investigate whether and why observers of the game can predict the trustworthiness of hand-written communications. Observers report their perception of the trustworthiness of messages, and make predictions about the senders’ behavior. Using observers’ decisions, we are able to classify messages as “promises” or “empty talk.” Drawing from substantial previous research, we hypothesize that certain factors influence whether a sender is likely to honor a message and/or whether an observer perceives the message as likely to behonored: the mention of money; the use of encompassing words; and message length. We find that observers have more trust in longer messages and “promises”; promises that mention money are significantly more likely to be broken; and observers trust equally in promises that do and do not mention money. Overall, observers perform slightly better than chance at predicting whether a message will be honored. We attribute this result to observers’ ability to distinguish promises from empty talk, and to trust promises more than empty talk. However, within each of these two categories, observers are unable to discern between messages that senders will honor from those that they will not.     

Culture, caution, and trust

Trust is an important determinant of economic development. Understanding its origins is therefore critical. We develop a principal-agent model with heterogeneous players to determine the aggregate amount of trustworthiness and trust in a society. People are distributed according to their preference toward caution, which we model as loss aversion. The first two moments of the distribution across principals and agents—along with institutional quality—are critical to the process by which trustworthiness and trust are formed. A direct effect suggests that more caution leads to less societal trust. An indirect effect of greater caution, working through trustworthiness, leads to more trust. Paradoxically, the net effect is almost always positive. The results are similar when we use expected utility theory. Different distributional assumptions can influence the results.     

Income inequality in the trust game

This paper presents an experiment measuring how lab-induced income inequality affects trust and trustworthiness. Low endowment subjects paired with high endowment subjects showed more trust than subjects in other pairs; this trust was reciprocated with high trustworthiness.     

Can you trust the good guys? Trust within and between groups with different missions

Non-governmental organizations and other non-profit organizations attract workers who strongly identify themselves with their missions. We study whether these “good guys” are more trustworthy, and how such pronounced group identities affect trust and trustworthiness within the groups and towards out-groups. We find that subjects who strongly identify themselves with a non-profit mission are more trustworthy in a minimal group setting but also harshly discriminate against out-groups when subjects are grouped by the missions they identify themselves with.     

It takes two to cheat: An experiment on derived trust

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.     

Playing the trust game with other people’s money

We experimentally investigate to what extent people trust and honor trust when they are playing with other people’s money (OPM). We adopt the well-known trust game by Berg et al. (in Games Econ. Behav. 10:122–142, 1995), with the difference that the trustor (sender) who sends money to the trustee (receiver) does this on behalf of a third party. We find that senders who make decisions on behalf of others do not behave significantly different from senders in our baseline trust game who manage their own money. But receivers return significantly less money when senders send a third party’s money. As a result, trust is only profitable in the baseline trust game, but not in the OPM treatment. The treatment effect among the receivers is gender specific. Women return significantly less money in OPM than in baseline, while there is no such treatment effect among men. Moreover, women return significantly less than men in the OPM treatment.     

Trust, trustworthiness, and risk in rural Paraguay

This dissertation looks at the relationship between trust, trustworthiness, and risk aversion in a rural Paraguayan setting. The first chapter of this dissertation looks at theft between farmers. Rural areas of developing countries often lack effective legal enforcement. However, villagers who know each other well and interact repeatedly may use implicit contracts to minimize crime. I construct a dynamic limited-commitment model in which a thief cannot credibly commit to forego stealing from his fellow villagers but may be induced to limit his stealing by the promise of future gifts from his potential victim. Using a unique survey from rural Paraguay which combines traditional data on production with information on theft, gifts, and trust, as well as with experiments measuring trust and trustworthiness, I test whether the data is consistent with predictions from the dynamic model. The results provide evidence that, in contrast with predictions from a one-period model with an anonymous thief, farmers do implicitly contract with one another to limit theft. Farmers who have more close family members in their village give fewer gifts, and farmers with plots which are more difficult to steal from give fewer gifts, experience less theft, and trust more. Gift-giving increases when trust is lower and the threat of theft is greater, turning the social capital literature on its head. The second chapter of this dissertation looks at a different linkage between trust, trustworthiness, and risk. Trusting behavior in general and play in the traditional trust experiment specifically depend both on trust beliefs and on levels of risk aversion. I ran two experiments with a diverse set of subjects in fifteen villages of rural Paraguay, the traditional trust experiment and a new experiment measuring only risk aversion. I find that risk attitudes are highly predictive of play in the trust game. In addition, omitting risk aversion as a regressor in trust regressions significantly changes the coefficients of important explanatory variables such as gender and wealth. The chair of this dissertation committee was Ethan Ligon and the other committee members were George Akerlof and Elisabeth Sadoulet.     

DO LIES ERODE TRUST?

Does honesty promote trust and trustworthiness? We investigate how being lied to (versus told the truth) in a Gneezy deception game affects behavior in a subsequent trust game with different players. Using a design that controls for potential treatment effects on payoffs, mood, and beliefs about the overall propensity for honesty in the experiment, we find that the specific experience of being lied to significantly erodes trust and trustworthiness.     

Collective Trust Behavior*

This paper investigates trust behavior in situations where decision‐makers are large groups and the decision mechanism is collective. Theories from behavioral economics and psychology suggest that trust in such situations may differ from interindividual trust. The experimental results here reveal a large difference in trust but not in trustworthiness between the individual and collective setting. Furthermore, a field experiment captures the determinants of collective trust behavior among two Swedish cohorts. Beliefs about the other group and one's own group are strongly associated with collective trustworthiness and trust behavior.     

A trust game in loss domain

In standard trust games, no trust is the default, and trust generates a potential gain. We investigate a reframed trust game in which full trust is default and where no trust generates a loss. We find significantly lower levels of trust and trustworthiness in the loss domain when full trust is default than in the gain domain when no trust is default. As a consequence, trust is on average profitable in the gain domain, but not in the loss domain. We also find that subjects respond more positively to higher trust in the loss domain than in the gain domain.     

Religion,discrimination and trust across three cultures

We propose that religion impacts trust and trustworthiness in ways that depend on how individuals are socially identified and connected. Religiosity and religious affiliation may serve as markers for statistical discrimination. Further, affiliation to the same religion may enhance group identity, or affiliation irrespective of creed may lend social identity, and in turn induce taste-based discrimination. Religiosity may also relate to general prejudice. We test these hypotheses across three culturally diverse countries. Participants׳ willingness to discriminate, beliefs of how trustworthy or trusting others are, as well as actual trust and trustworthiness are measured incentive compatibly. We find that interpersonal similarity in religiosity and affiliation promote trust through beliefs of reciprocity. Religious participants also believe that those belonging to some faith are trustworthier, but invest more trust only in those of the same religion—religiosity amplifies this effect. Across non-religious categories, whereas more religious participants are more willing to discriminate, less religious participants are as likely to display group biases.     

TRUST,VALUES, AND FALSE CONSENSUS

Individuals’ beliefs about the trustworthiness of a generic member of the population are both heterogeneous across individuals and persistent across generations. We investigate one mechanism yielding these dual patterns: false consensus. In the context of a trust game experiment, we show that the relationship between behavior and beliefs is consistent with individuals extrapolating their trust beliefs from their own trustworthiness and that this tendency continues even after substantial learning opportunities. We go on to provide evidence suggesting that one's own trustworthiness can be traced back to the values parents transmit to their children during their upbringing.     

居民对中、外资金融机构的比较评价研究——来自中国九个城市的证据

Between domestic financial institutions and foreign or joint venture ones in China, which ones do Chinese people give better assessment to? And what factors affect those comparative assessments? With a household survey in nine cities in China in 2006, we find that China’s domestic financial institutions are considered better than foreign or joint venture ones in terms of financial products, communication with investors, security and prudence, operation standardization and service attitudes. When taken into account the endogeneity of people’s trust on government regulation agencies, empirical results show that people’s more attention to returns or the more trust on government regulation agencies leads to their better assessments on domestic financial institutions than foreign or joint venture ones. The policy implications are: Chinese governments have to take measures to improve residents’ trust in governmental regulation and create a fair competition environment for domestic and foreign financial institutions in China. Domestic and foreign financial institutions make efforts to develop a higher rate-of-return and attractive financial products to service more customers.     

Do reputation feedback systems really improve trust among anonymous traders? An experimental study

Feedback systems are claimed to be a crucial component of the success of electronic marketplaces like eBay or Amazon Marketplace. This article aims to compare the effects of various feedback systems on trust between anonymous traders, through a set of experiments based on the trust game. Our results indicate that trust is significantly improved by the introduction of a reputation feedback system. However, such mechanisms are far from being perfect and are vulnerable to strategic ratings and reciprocation. Our findings indicate that some changes in rating rules may significantly improve the efficiency of feedback systems, by avoiding strategic rating or reciprocation, and hence stimulate trust and trustworthiness among traders. In particular, a system in which individuals are not informed of their partner's rating decision before making their own decision provides better results, both in terms of trust and earnings.     

异质型创业领导、嵌入授权对团队簇个体绩效的跨层次影响研究

团队簇创新和创业交互属性与领导的差异化嵌入授权行为关联紧密,而参与个体对彼此能力的互信是进行有效合作的前提。据此,关注能力互信氛围在团队绩效中的作用机理与外部情境能够有效解析异质型创业领导对团队簇个体绩效作用的相机变化效应。以创业型领导异质性、嵌入授权(结构、心理与认知授权)和能力互信氛围作为团队层次变量,将个体绩效作为个体层次变量,考察嵌入授权的跨层次中介以及能力互信氛围的调节作用。结果发现：内部比较优势导向异质性不直接影响成员个体绩效,而外部战略价值导向异质性则有助于促进个体绩效;嵌入授权在异质性与个体绩效间起中介作用;能力互信氛围在嵌入授权与个体绩效间起跨层次调节作用。根据研究结果,提出相关管理启示。     

Real exchange rate volatility,financial crises and exchange rate regimes

This article examines real exchange rate (RER) volatility in 80 countries around the world, during the period 1970 to 2011. Two main questions are raised: are structural breaks in RER volatility related to changes in exchange rate regimes or financial crises? And do these two events affect the permanent and transitory components of RER volatility? To answer these, we employ two complementary procedures that consist in detecting structural breaks in the RER series and decomposing volatility into its permanent and transitory components. Our results suggest that structural breaks in RER volatility coincidence with financial crises and certain changes in nominal exchange rate regimes. Moreover, our findings confirm that RER volatility does increase with the global financial crises and detect that the more flexible the exchange rate regime, the higher the volatility of the RER using a de facto exchange rate classification.     

Does competition foster trust? The role of tournament incentives

Members of organizations are often called upon to trust others and to reciprocate trust while at the same time competing for bonuses or promotions. We suggest that competition affects trust not only within dyads including direct competitors, but also between individuals who do not compete against each other. We test this idea in a trust game where trustors and trustees are rewarded based either on their absolute performance or on how well they do relative to players from other dyads. In Experiment 1, we show that competition among trustors significantly increases trust. Competition among trustees decreases trustworthiness, but trustors do not anticipate this effect. In Experiment 2, we additionally show that the increase in trust under competition is caused by a combination of increased risk taking and lower sensitivity to non-financial concerns specific to trust interactions. Our results suggest that tournament incentives might have a “blinding effect” on considerations such as betrayal and inequality aversion.