Social Norms, Information and Trust among Strangers: Theory and Evidence

John Duffy, Huan Xie and Yong-Ju Lee (yj0612.lee@samsung.com)
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Yong-Ju Lee: Samsung Research Institute of Finance

No 8007, Working Papers from Concordia University, Department of Economics

Abstract: Can a social norm of trust and reciprocity emerge among strangers? We investigate this question by examining behavior in an experiment where subjects repeatedly play a two-player binary ―trust‖ game. Players are randomly and anonymously paired with one another in each period. The main questions addressed are whether a social norm of trust and reciprocity emerges under the most extreme information restriction (anonymous community-wide enforcement) or whether trust and reciprocity require additional, individual-specific information about a player’s past history of play and whether that information must be provided freely or at some cost. In the absence of such reputational information, we find that a social norm of trust and reciprocity is difficult to sustain. The provision of reputational information on past individual decisions significantly increases trust and reciprocity, with longer histories yielding the best outcomes. Importantly, we find that making reputational information available at a small cost may also lead to a significant improvement in trust and reciprocity, despite the fact that most subjects do not choose to purchase this information.

Keywords: Social Norms; Trust Game; Random Matching; Trust and Reciprocity; Information; Reputational Mechanisms; Experimental Economics. (search for similar items in EconPapers)
JEL-codes: C72 C78 C91 C92 L14 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2008-08, Revised 2001-07
New Economics Papers: this item is included in nep-cbe, nep-evo, nep-exp, nep-gth and nep-soc
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Citations: View citations in EconPapers (6)

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Journal Article: Social norms, information, and trust among strangers: theory and evidence (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:crd:wpaper:08007

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