Trust and Reciprocity with Transparency and Repeated Interactions

Kiridaran Kanagaretnam, Stuart Mestelman, S.M.Khalid Nainar and Mohamed Shehata

Department of Economics Working Papers from McMaster University

Abstract: This paper uses data from a controlled laboratory environment to study the impact of transparency (i.e., complete information versus incomplete information) and repeated interactions on the level of trust and trustworthiness in an investment game setting. The key findings of the study are that transparency (complete information) significantly increases trusting behavior in one-shot interactions. This result persists in repeated interactions. Further, transparency appears important for trustworthiness in one-shot interactions. In addition, repeated interaction increases trust and reciprocity with or without transparency. These results suggest transparency is important in building trust in business environments such as alliances and joint-ventures which are loosely connected organizational forms that bring together otherwise independent firms. It also provides support for the Sarbanes-Oxley Act of 2002 (SOX) and similar legislation elsewhere which attempt to regain investors’ trust in corporate management and financial markets by stipulating enhanced disclosures.

Keywords: Transparency; Trust; Reciprocity; Repeated interaction; Business Alliances; SOX (search for similar items in EconPapers)
JEL-codes: C70 C91 D63 D81 D82 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2009-05
New Economics Papers: this item is included in nep-exp and nep-soc
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Trust and reciprocity with transparency and repeated interactions (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:mcm:deptwp:2009-03

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