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Trust, Communication and Contracts: An Experiment

Avner Ben-Ner () and Louis Putterman

Working Papers from Human Resources and Labor Studies, University of Minnesota (Twin Cities Campus)

Abstract: In the one-shot trust or investment game without opportunities for reputation formation or contracting, economic theory predicts no trusting because there is no incentive for trustworthiness. Under these conditions, theory predicts (a) no effect of pre-play communication, and (b) universal preference for moderate cost binding contracts over interacting without contracts. We introduce the opportunities to engage in pre-play communication and to enter binding or non-binding contracts, and find (a) communication increases trusting and trustworthiness, (b) contracts are largely unnecessary for trusting and trustworthy behaviors and are eschewed by many players, and (c) more trusting leads to higher earnings, and (d) both trustors and trustees favor “fair and efficient” proposals over the more unequal proposals predicted by theory.

Keywords: trust game; trust; trustworthiness; reciprocity; commitment; communication. Comparative analysis of agency problems; Production of public goods (search for similar items in EconPapers)
JEL-codes: C72 C91 D63 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe, nep-evo, nep-exp, nep-soc and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Trust, communication and contracts: An experiment (2009) Downloads
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