Moral Hazard and Reciprocity

Marco Castillo and Gregory Leo

Southern Economic Journal, 2010, vol. 77, issue 2, 271-281

Abstract: We investigate the motives behind reciprocal behavior by making selfish acts anonymous and not common knowledge. In one treatment, subjects were assigned to the role of proposer or responder and played a trust game with random matching for 20 rounds. In a second treatment, the modified game, the procedures were the same, but responders were allowed to choose with only 80% probability. With 20% probability, responders were restricted to keep any money passed. Only responders knew whether they were restricted or not. We find that the behavior of responders is different in this modified trust game. The fact that responders can hide selfish acts generates more selfish behavior. This in turn makes proposers less likely to pass money to responders, thereby destroying trust. We find important session effects in the standard trust game but less so in the modified game. Our experiments show that information conveyed in actions is important to subjects' decisions.

Date: 2010
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.4284/sej.2010.77.2.271

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:soecon:v:77:y:2010:i:2:p:271-281

Access Statistics for this article

More articles in Southern Economic Journal from John Wiley & Sons
Bibliographic data for series maintained by Wiley Content Delivery ().