Trust and reputation under asymmetric information

Moritz Janas and Emilia Oljemark

Journal of Economic Behavior & Organization, 2021, vol. 185, issue C, 97-124

Abstract: We study the role of information about the multiplier in a finitely repeated investment game. A high multiplier increases the reputational incentives of a trustee, leading to more repayments. Our perfect Bayesian equilibrium analysis shows that if the trustee is privately informed about the multiplier, both the expected frequency of investments and repayments as well as the expected payoffs of both players are higher compared to a situation where the multiplier is public knowledge. We test this result in a laboratory experiment. The data cannot confirm the predicted welfare dominance of private information about the multiplier. We discuss potential reasons for the deviation between theory and experimental data.

Keywords: Reputation; Trust; Incomplete information; Experiment (search for similar items in EconPapers)
JEL-codes: C73 C92 D82 D83 M13 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:185:y:2021:i:c:p:97-124

DOI: 10.1016/j.jebo.2021.02.023

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