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Trust and Financial Trades: Lessons from an Investment Game Where Reciprocators Can Hide Behind Probabilities

Radu Vranceanu (), Angela Sutan and Delphine Dubart ()
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Delphine Dubart: ESSEC Business School, Postal: Avenue Bernard Hirsch - B.P. 50105, 95021 CERGY-PONTOISE Cedex, FRANCE,

No DR 10007, ESSEC Working Papers from ESSEC Research Center, ESSEC Business School

Abstract: In this paper we show that if a very small, exogenously given probability of terminating the exchange is introduced in an elementary investment game, reciprocators play more often the defection strategy. Everything happens as if they "hide behind probabilities" in order to break the trust relationship. Investors do no not seem able to internalize the reciprocators' change in behavior. This could explain why trades involving an exogenous risk of value destruction, such as financial transactions, provide an unfavorable environment for trust-building

Keywords: Experimental Economics; Financial Transactions; Investment Game; Objective Risk; Trust (search for similar items in EconPapers)
JEL-codes: C90 D81 G00 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2010-05
New Economics Papers: this item is included in nep-cbe and nep-exp
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Related works:
Journal Article: Trust and financial trades: Lessons from an investment game where reciprocators can hide behind probabilities (2012) Downloads
Working Paper: Trust and financial trades: lessons from an investment game wher reciprocators can hide behind probabilities (2011) Downloads
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