Incentivising trust

Pamela Lenton and Paul Mosley
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Paul Mosley: Department of Economics, The University of Sheffield

No 2009004, Working Papers from The University of Sheffield, Department of Economics

Abstract: We argue that trust can be incentivised by measures which increase the ability of trusters to protect themselves against risk. We work within the framework originally established by Berg, Dickhaut and McCabe (1995) in which trust is measured experimentally as the ability to generate reciprocity in response to an initial offer of money within a two-person game. An incentive is conveyed both by means of variations in the multiplier applied to the first player’s initial offer and by giving the first player the opportunity to insure themselves against the possibility that the second player will fail to reciprocate their initial offer. Measured trust is strongly responsive to both these incentives. Thus third parties have the ability to influence the outcome of the game, not only, as in the analysis of Charness et al (2008), by punishing failure to reciprocate and rewarding ‘good’ initial offers, but also by offering protection which strengthens the first player’s risk efficacy, or ratio of assets to risk.

Keywords: Experimental economics; Game theory; Risk; Reciprocity (search for similar items in EconPapers)
JEL-codes: A13 C70 C73 D81 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2009-03, Revised 2009-03
New Economics Papers: this item is included in nep-cbe, nep-evo, nep-exp, nep-gth, nep-hpe and nep-soc
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Incentivising trust (2011)
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