Trust, risk, and institutions: experimental evidence from a community of firms in Kenya

Maria Porter, Ahmed Salim Nuhu, Eduardo Nakasone () and Mywish K. Maredia

Journal of Economic Psychology, 2025, vol. 110, issue C

Abstract: We study whether personal relationships amongst firms can foster trust as a mechanism to overcome challenging business environments. In partnership with a community of small- and medium-scale enterprises in Kenya, we implemented trust games in a framed field experiment. Our main finding is that outside enforcement of exchanges most effectively increases amounts sent to recipients. A secondary finding is that active members of the business association may be more trusting of fellow members when identities are to be revealed compared to when decisions remain anonymous. Our findings suggest that while association-based networking can perhaps partially offset an adverse business environment, in trust-related decision-making, such informal mechanisms do not fully compensate for lack of outside enforcement that can result from weak institutions.

Keywords: Trust game; Business associations; Small and medium-sized enterprises; Risk; Experimental economics (search for similar items in EconPapers)
JEL-codes: C91 C93 D22 L14 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:joepsy:v:110:y:2025:i:c:s0167487025000467

DOI: 10.1016/j.joep.2025.102834

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