Trust

Iris Bohnet,, Herrmann, B., Paryavi, M., Tran, A., & Zeckhauser, R. (2017). Improving Outcomes in the Trust Game: The Games People Choose in Oman, the United States, and Vietnam. In Trust in Social Dilemmas . Oxford, Oxford University Press.Abstract

This chapter shows how people in three culturally different contexts, Oman, the United States and Vietnam, deal with trust situations. We offer two trust-fostering mechanisms principals can choose from—a mitigation-based approach, decreasing the principal’s cost of betrayal, and a prevention-based approach, increasing the agent’s benefits of trustworthiness. We refer to the former as “insurance” and to the latter as “bonus.” We measure what choices principals make, how agents respond to them and how both parties’ behaviors compare to a situation where insurance or bonus was assigned by chance.  We find some differences among the studied countries; but overall, our results show strong similarities. About two-thirds of our principals prefer the safety of the insurance mechanism.  However, by insuring themselves, they make it less likely for their trust to be rewarded. The remaining one-third of our principals prefer sending a bonus, making themselves vulnerable to the agent. This vulnerability pays off by tripling the likelihood of trustworthiness compared to when insurance is chosen. Still, when a bonus is chosen, only about half of the agents reward trust. This fraction is not sufficient to make the principals whole.  In terms of expected payoffs principals would be better off with insurance.

Ashraf, N., Iris Bohnet,, & Piankov, N. (2006). Decomposing trust and trustworthiness. Experimental Economics , 9 193–208. Publisher's VersionAbstract

What motivates people to trust and be trustworthy? Is trust solely “calculative,” based on the expectation of trustworthiness, and trustworthiness only reciprocity? Employing a within-subject design, we run investment and dictator game experiments in Russia, South Africa and the United States. Additionally, we measured risk preferences and expectations of return. Expectations of return account for most of the variance in trust, but unconditional kindness also matters. Variance in trustworthiness is mainly accounted for by unconditional kindness, while reciprocity plays a comparatively small role. There exists some heterogeneity in motivation but people behave surprisingly similarly in the three countries studied.

Iris Bohnet,, & Baytelman, Y. (2007). Institutions and Trust: Implications for Preferences, Beliefs and Behavior. Rationality and Society , 19 (1), 99-135. Publisher's VersionAbstract

Institutions matter - but how? This article employs experiments to examine whether institutions only affect trust and trustworthiness behavior by changing constraints and thereby the beliefs people hold about others' behavior, as commonly assumed in a rational choice framework, or also by influencing preferences. In a within-subject design, we confront people with an anonymous one-shot trust game, a one-shot game with pre-play communication, post-play communication and a post-play punishment option and a finitely repeated game. Institutions increasing the cost of betrayal as compared to an anonymous one-shot game affect people's beliefs and enhance their willingness to trust and be trustworthy. However, all settings that offer tighter institutional constraints compared to the anonymous one-shot game decrease intrinsically motivated trust. They do not influence trustworthiness. Thus, institutions may also affect preferences. The ‘crowding-out’ of intrinsic trust is of concern as it has been found to be associated with economic performance and democracy.

Iris Bohnet,, & Zeckhauser, R. J. (2003). Trust, Risk and Betrayal. Journal of Economic Behavior & Organization , 55 (4), 467–484 . Rochester, {NY}, Social Science Research Network. Publisher's VersionAbstract

Using experiments, we examine whether the decision to trust a stranger in a one-shot interaction is equivalent to taking a risky bet, or if a trust decision entails an additional risk premium to balance the costs of trust betrayal. We compare a binary-choice Trust game with a structurally identical, binary-choice Risky Dictator game with good or bad outcomes. We elicit individuals' minimum acceptable probabilities (MAPs) of getting the good outcome such that they would prefer the chance to the sure payoff. First movers state higher {MAPs} in the Trust game than in situations where nature determines the outcome.

Iris Bohnet,, Herrmann, B., & Zeckhauser, R. (2010). "Trust and the Reference Points for Trustworthiness in Gulf and Western Countries." Quarterly Journal of Economics , CXXV (2), 811-828. Publisher's VersionAbstract

Why is private investment so low in Gulf compared to Western countries? We investigate cross-regional differences in trust and reference points for trustworthiness as possible factors. Experiments controlling for cross-regional differences in institutions and beliefs about trustworthiness reveal that Gulf citizens pay much more than Westerners to avoid trusting, and hardly respond when returns to trusting change. These differences can be explained by subjects' gain/loss utility relative to their region's reference point for trustworthiness. The relation-based production of trust in the Gulf induces higher levels of trustworthiness, albeit within groups, than the rule-based interactions prevalent in the West.

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