Trust, Reciprocity and Rules

Thomas Rietz, Eric Schniter, Roman Sheremeta and Timothy Shields
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Thomas Rietz: Henry B. Tippie College of Business, University of Iowa

Working Papers from Chapman University, Economic Science Institute

Abstract: In the absence of enforceable contracts, many economic and personal interactions rely on trust and reciprocity. Research shows that although this reliance often works well, sometimes it breaks down. Simple rules mandating minimum standards on reciprocation prevent the most egregious trust violations, but may also undermine behavior that would have otherwise produced higher overall economic welfare. We test the efficacy of exogenously imposed minimum return rules using experimental trust games. We find that rules fail to increase trust and trustworthiness. Thus low minimum standards significantly decrease economic welfare. Although sufficiently restrictive rules restore welfare, trust and trustworthy behavior never returns.

Keywords: trust games; experiments; reputation; information; reciprocity (search for similar items in EconPapers)
JEL-codes: C72 C91 D72 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2011
New Economics Papers: this item is included in nep-cbe, nep-evo, nep-exp, nep-gth, nep-hpe and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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http://www.chapman.edu/ESI/wp/Schniter-Sheremeta-S ... iprocityandRules.pdf (application/pdf)

Related works:
Journal Article: TRUST, RECIPROCITY, AND RULES (2018)
Working Paper: Trust, Reciprocity and Rules (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:chu:wpaper:11-06

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