Institutions and Trust

Iris Bohnet and Yael Baytelman
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Iris Bohnet: Kennedy School of Government, Harvard University, 79 JFK Street, Cambridge, MA 02138, USA Iris_Bohnet@Harvard.edu
Yael Baytelman: Departamento de Economía, Universidad de Chile, Diagonal Paraguay 257, Santiago, Chile ybaytel@econ.uchile.cl

Rationality and Society, 2007, vol. 19, issue 1, 99-135

Abstract: Institutions matter - but how? This article employs experiments to examine whether institutions only affect trust and trustworthiness behavior by changing constraints and thereby the beliefs people hold about others' behavior, as commonly assumed in a rational choice framework, or also by influencing preferences. In a within-subject design, we confront people with an anonymous one-shot trust game, a one-shot game with pre-play communication, post-play communication and a post-play punishment option and a finitely repeated game. Institutions increasing the cost of betrayal as compared to an anonymous one-shot game affect people's beliefs and enhance their willingness to trust and be trustworthy. However, all settings that offer tighter institutional constraints compared to the anonymous one-shot game decrease intrinsically motivated trust. They do not influence trustworthiness. Thus, institutions may also affect preferences. The ‘crowding-out’ of intrinsic trust is of concern as it has been found to be associated with economic performance and democracy.

Keywords: trust; trustworthiness; incentives; intrinsic motivation; crowding-out; experiments (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (29)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:ratsoc:v:19:y:2007:i:1:p:99-135

DOI: 10.1177/1043463107075110

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