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Trust and Reciprocity in the Investment Game with Indirect Reward

Werner G³th, Manfred K÷nigstein, Nadège Marchand () and Klaus Nehring
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Werner G³th: Max Planck Institute for Research into Economic Systems, Strategic Interaction Unit, Jena, Germany
Manfred K÷nigstein: Humboldt University at Berlin, Institute for Economic Theory III, Berlin, Germany

Authors registered in the RePEc Author Service: Werner Güth ()

Homo Oeconomicus, 2001, vol. 18, 241-262

Abstract: Experimental studies have shown that trust and reciprocity are effective in increasing efficiency when complete contracting is infeasible. One example is the study by Berg et al. (1995) of the investment game. In this game the person who receives the investment is the one who may reward the investor. This is a direct reward game. Similar to Dufwenberg et al. (2001) we investigate to what extent trust and reward are still observable when reward is indirect; i.e., when the investor may only be rewarded by a third person who did receive his investment. Furthermore, we investigate the influence of social comparison (information about other players' investments) Our main finding is that indirect reward significantly reduces mutual cooperation.

Date: 2001
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Handle: RePEc:hom:homoec:v:18:y:2001:p:241-262