Institutions and Opportunistic Behavior: Experimental Evidence

Antonio Cabrales, Irma Clots-Figueras, Roberto Hernán-González and Praveen Kujal
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Roberto Hernán-González: Burgundy School of Business
Authors registered in the RePEc Author Service: Roberto Hernán González

Working Papers from Chapman University, Economic Science Institute

Abstract: Risk mitigating institutions have long been used by societies to protect against opportunistic behavior. We know little about how they are demanded, who demands them or how they impact subsequent behavior. To study these questions, we run a large-scale online experiment where insurance can be purchased to safeguard against opportunistic behavior. We compare two different selection mechanisms for risk mitigation, the individual and the collective (voting). We find that, whether individual or collective, there is demand for riskmitigating institutions amongst high-opportunism individuals, while low-opportunism individuals demand lesser levels of insurance. However, high-opportunism individuals strategically demand lower insurance institutions when they are chosen collectively through voting. We also find that the presence of risk mitigating institutions crowds out reciprocity. Reciprocity is lower when the no-insurance option is chosen among other insurance options than when it is not available. Finally, we also observe higher gains from exchange in lowopportunism groups than in more opportunistic ones.

Keywords: institutions; trust; trustworthiness; voting; insurance (search for similar items in EconPapers)
JEL-codes: C92 D02 D64 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-cdm, nep-exp, nep-ias and nep-soc
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Persistent link: https://EconPapers.repec.org/RePEc:chu:wpaper:21-05

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