Trust and financial trades: Lessons from an investment game where reciprocators can hide behind probabilities

Radu Vranceanu, Angela Sutan and Delphine Dubart

Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), 2012, vol. 41, issue 1, 72-78

Abstract: This paper shows that if a very small, exogenously given probability of terminating the exchange is introduced in an elementary investment game, more reciprocators will choose the defection strategy. Everything happens as if they “hide behind probabilities” in order to break the trust relationship. Investors do not alter their behavior in a significant way, at least not for a very small external risk. Financial assets all come with a predetermined and contractual probability that by the time when the buyer has to receive the reward for his investment, “bad luck” might have brought the asset value down to zero. In the light of the experimental findings, such trades would not provide a favorable environment for building trust.

Keywords: Trust; Financial transactions; Experimental economics; Investment game; External randomness (search for similar items in EconPapers)
JEL-codes: C90 D81 G00 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Trust and financial trades: lessons from an investment game wher reciprocators can hide behind probabilities (2011)
Working Paper: Trust and Financial Trades: Lessons from an Investment Game Where Reciprocators Can Hide Behind Probabilities (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:soceco:v:41:y:2012:i:1:p:72-78

DOI: 10.1016/j.socec.2011.10.011

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