Economic Incentives or Communication: How Different Are their Effects on Trust

Tatiana Iwai and Paulo Azevedo

No 225, Business and Economics Working Papers from Unidade de Negocios e Economia, Insper

Abstract: This study investigates the effects of economic incentives and communication on the cognitive and behavioral responses after an alleged trust violation. We argue that these responses depend on the type of solution used to foster cooperation between agents. On the cognitive level, we compare the effects that structural (economic incentives) and motivational (communication) solutions exert on trusting beliefs and trusting intentions after an adverse event. On the behavioral level, we compare these effects on the willingness to bear risk. Our experiment shows that, after a negative event, relationships wherein communication is used to foster cooperation are associated to greater external causal attribution, greater perceived benevolence/integrity, and greater willingness to reconcile and to accept risks related to other's behavior. These findings suggest that relationships based on motivational solutions are more resilient to negative events than one based on structural solutions.

Pages: 32 pages
Date: 2016
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