INVESTMENT CHOICE ARCHITECTURE IN TRUST GAMES: WHEN “ALL‐IN” IS NOT ENOUGH

Joaquín Gómez‐Miñambres, Eric Schniter and Timothy Shields

Economic Inquiry, 2021, vol. 59, issue 1, 300-314

Abstract: While many economic interactions feature “All‐or‐Nothing” options nudging investors towards going “all‐in,” such designs may unintentionally affect reciprocity. We manipulate the investor's action space in two versions of the “trust game.” In one version investors can invest either “all” their endowment or “nothing.” In the other version, they can invest any amount of the endowment. Consistent with our intentions‐based model, we show that “all‐or‐nothing” designs coax more investment but limit investors' demonstrability of intended trust. As a result, “all‐in” investors are less generously reciprocated than when they can invest any amount, where full investments are a clearer signal of trustworthiness. (JEL C72, C90, C91, D63, D64, L51)

Date: 2021
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https://doi.org/10.1111/ecin.12939

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Working Paper: Investment Choice Architecture in Trust Games: When “All-in” Is Not Enough (2019)
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