Building and Rebuilding Trust with Promises and Apologies

Eric Schniter, Roman Sheremeta and Daniel Sznycer

MPRA Paper from University Library of Munich, Germany

Abstract: Using trust games, we study how promises and messages are used to build new trust where it did not previously exist and to rebuild damaged trust. In these games, trustees made non-binding promises of investment-contingent returns, then investors decided whether to invest, and finally trustees decided how much to return. After an unexpected second game was announced, but before it commenced, trustees could send a one-way message. This design allowed us to observe the endogenous emergence and natural distribution of trust-relevant behaviors and focus on naturally occurring remedial strategies used by promise-breakers and distrusted trustees, their effects on investors, and subsequent outcomes. In the first game 16.6% of trustees were distrusted and 18.8% of trusted trustees broke promises. Trustees distrusted in the first game used long messages and promises closer to equal splits to encourage trust in the second game. To restore damaged trust, promise-breakers used apologies and upgraded promises. On average, investments in each game paid off for investors and trustees, suggesting that effective use of cheap signals fosters profitable trust-based exchange in these economies.

Keywords: promise; atonement; apology; cheap talk; cheap signals; trust game; trust building; remedial strategies; reciprocity; experiments (search for similar items in EconPapers)
JEL-codes: C72 C91 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (34)

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Related works:
Journal Article: Building and rebuilding trust with promises and apologies (2013)
Working Paper: Building and Rebuilding Trust with Promises and Apologies (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:53596

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