What you don’t know won’t hurt you: a laboratory analysis of betrayal aversion

Jason Aimone and Daniel Houser

Experimental Economics, 2012, vol. 15, issue 4, 588 pages

Abstract: Recent research argues “betrayal aversion” leads many people to avoid risk more when a person, rather than nature, determines the outcome of uncertainty. However, past studies indicate that factors unrelated to betrayal aversion, such as loss aversion, could contribute to differences between treatments. Using a novel experiment design to isolate betrayal aversion, one that varies how strategic uncertainty is resolved, we provide rigorous evidence supporting the detrimental impact of betrayal aversion. The impact is substantial: holding fixed the probability of betrayal, the possibility of knowing that one has been betrayed reduces investment by about one-third. We suggest emotion-regulation underlies these results and helps to explain the importance of impersonal, institution-mediated exchange in promoting economic efficiency. Copyright Economic Science Association 2012

Keywords: Betrayal aversion; Risk; Trust; Emotion regulation; C91; D03; D81 (search for similar items in EconPapers)
Date: 2012
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Working Paper: What You Don't Know Won't Hurt You: A Laboratory Analysis of Betrayal Aversion (2008)
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DOI: 10.1007/s10683-012-9314-z

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