Research

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.

This paper provides experimental evidence on how informational differences may translate into performance differences in competitive environments. In a laboratory tournament setting, we manipulate beliefs about the effort-reward relationship by varying how much information people receive on the potential impact of luck on outcomes. We find that an informational disadvantage worsens the understanding of the effort-reward relationship, and significantly lowers performance. Our study is inspired by informational differences in the labor market where some individuals have less data on the determinants of economic success than others -- due to social networks or the availability of similar others to learn from.

We examine a new intervention to overcome gender biases in hiring, promotion, and job assignments: an “evaluation nudge,” in which people are evaluated jointly rather than separately regarding their future performance. Evaluators are more likely to focus on individual performance in joint than in separate evaluation and on group stereotypes in separate than in joint evaluation, making joint evaluation the money-maximizing evaluation procedure. Our findings are compatible with a behavioral model of information processing and with the System 1/System 2 distinction in behavioral decision research where people have two distinct modes of thinking that are activated under certain conditions.

To trust is to risk. When we lend someone money, we make ourselves vulnerable, hoping that the borrower will reward our trust and return the money at a later stage, possibly with interest or a reciprocal favor added. Generally, people are more willing to engage in a risky activity, such as buying a stock or starting a business, the greater the expected returns from the activity. This chapter examines whether willingness to trust follows the same logic, that is, whether it responds to changes in the expected value of trusting, much like willingness to take risk responds to changes in the expected value of risk taking in three countries of the Arab Middle East, namely, Jordan, Saudi Arabia and the United Arab Emirates and in the United States. The chapter shows that trust is promoted very differently in the Middle East than in the United States.

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.

Analytical sociology is a strategy for understanding the social world. It is concerned with explaining important social facts such as network structures, patterns of residential segregation, typical beliefs, cultural tastes, and common ways of acting. It explains such facts by detailing in clear and precise ways the mechanisms through which the social facts were brought about. Making sense of the relationship between micro and macro thus is one of the central concerns of analytical sociology. The approach is a contemporary incarnation of Robert K. Merton's notion of middle-range theory and presents a vision of sociological theory as a tool-box of semi-general theories each of which is adequate for explaining certain types of phenomena. The Handbook brings together some of the most prominent sociologists in the world. Some of the chapters focus on action and interaction as the cogs and wheels of social processes, while others consider the dynamic social processes that these actions and interactions bring about.

Women, and particularly women in all-female groups, appear to be especially adept at providing public goods in developing countries. We use a one-shot Public Goods game to explore the effect of sex and a group's sex composition on the voluntary provision of public goods in a Nairobi slum. Sex heterogeneity hurts the voluntary provision of public goods because women—but not men—contribute less in mixed-sex than same-sex groups. Women contribute as much as men in same-sex groups. This result is driven by women's pessimism and men's optimism about others’ contributions in mixed-sex groups rather than by gendered social preferences.

Few areas have witnessed the type of growth we have seen in the affective sciences in the past decades. Across psychology, philosophy, economics, and neuroscience, there has been an explosion of interest in the topic of emotion and affect.

Due to betrayal aversion, people take risks less willingly when the agent of uncertainty is another person rather than nature. Individuals in six countries (Brazil, China, Oman, Switzerland, Turkey, and the United States) confronted a binary-choice trust game or a risky decision offering the same payoffs and probabilities. Risk acceptance was calibrated by asking individuals their "minimum acceptable probability" (MAP) for securing the high payoff that would make them willing to accept the risky rather than the sure payoff. People's MAPs are generally higher when another person, rather than nature, determines the outcome. This indicates betrayal aversion.

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)

Trust is the willingness to make oneself vulnerable to another person's actions, based on beliefs about that person's trustworthiness. This article focuses on interpersonal trust and trustworthiness between two people, a trustor and a trustee, as measured in laboratory experiments. A trustee behaves trustworthily if he voluntarily refrains from taking advantage of the trustor's vulnerability. Trust applies to all transactions where the outcome is partly under the control of another person and not fully contractible. The article discusses measurement issues, the motives for and influences on trust and trustworthiness (incentives, repetition and demographic variables) and questions of external validity.

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.

Trust involves a willingness to accept vulnerability, comprised of the risk of being worse off than by not trusting, the risk of being worse off than the trusted party (disadvantageous inequality), and the risk of being betrayed by the trusted party. We examine how people’s status, focusing on sex, race, age and religion, affects their willingness to accept these three risks. We experimentally measure people’s willingness to accept risk in a decision problem, a risky dictator game, and a trust game, and compare responses across games. Groups typically considered having lower status in the US – women, minorities, young adults and non-Protestants – are averse to disadvantageous inequality while higher status groups – men, Caucasians, middle-aged people and Protestants – dislike being betrayed.