Efficiency in the trust game: an experimental study of precommitment

Bracht, Juergen; Feltovich, Nick

doi:10.1007/s00182-007-0092-3

Cited by 21 publications

(15 citation statements)

References 35 publications

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“…payments such as satisfaction guaranteed and escrow accounts were experimentally studied respectively by Andreoni (2005) and Bracht and Feltovich (2008). In their setup, giving the trustor an option to annul the transaction or forfeit the amount that the trustee deposited in the escrow account can provide sufficient incentives for the trustee to act upon the terms of deal.…”

Section: Pecuniary Mechanisms Fostering Relationships That Rely On Enmentioning

confidence: 99%

“…Real life offers many examples of situations in which trust forms a bond of a relationship and is reinforced by monetary or/and nonmonetary means. A good example is marriage which in number of societies combine a public pledge -a non-pecuniary 1 For example, Berg, Dickhaut, and McCabe (1995), Ellingson and Johanesson (2004), Engle- Warnick and Slonim (2004), Andreoni (2005), Charness and Dufwenberg (2006), Huck, Ruchala, and Tyran (2007), Bracht and Feltovich (2008), Dufwenberg, Servátka, and Vadovič (2008), Vadovič (2008a, 2008b) and many others. 2 Non-pecuniary mechanism such as a handshake or an agreement which relies on guilt for example is usually observed in the repeated game context and hence monetary incentives could be present via reputation building.…”

Section: Introductionmentioning

confidence: 99%

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Words speak louder than money

Servátka

Tucker

Vadovič

2011

Journal of Economic Psychology

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This paper reports on an experiment studying the effectiveness of two types of mechanisms for promoting trust: pecuniary and non-pecuniary as well as their mutual interaction. Our data provide evidence that both mechanisms significantly enhance trust in comparison to the standard investment game. However, we find that the pecuniary mechanism performs significantly worse than the non-pecuniary one. Our results also point to the fact that pecuniary mechanism, which depends on monetary incentives, can be counterproductive when combined with mechanism which relies primarily on psychological incentives.

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Section: Pecuniary Mechanisms Fostering Relationships That Rely On Enmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Words speak louder than money

Servátka

Tucker

Vadovič

2011

Journal of Economic Psychology

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“…However, if the trustor invests and trustee appropriates the surplus, the entire escrow amount gets forfeited, but the trustor does not receive anything. [71] find that the efficiency of the mechanism depends on the amount that is deposited into an escrow account, but not so much on whether it is chosen voluntarily or imposed by the experimenter.…”

Section: Open Accessmentioning

confidence: 82%

Building Trust—One Gift at a Time

Servátka

Tucker

Vadovič

2011

Games

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This paper reports an experiment evaluating the effect of gift giving on building trust. We have nested our explorations in the standard version of the investment game. Our gift treatment includes a dictator stage in which the trustee decides whether to give a gift to the trustor before both of them proceed to play the investment game. We observe that in such case the majority of trustees offer their endowment to trustors. Consequently, receiving a gift significantly increases the amounts sent by trustors when controlling for the differences in payoffs created by it. Trustees are, however, not better off by giving a gift as the increase in the amount sent by trustors is not large enough to offset the trustees' loss associated with the cost of giving a gift.

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“…10 Bohnet and Huck (2004) show that when reputations are used to build trust, the goodwill carries over to situations where reputations cannot form. Bracht and Feltovich (2008) find that allowing for voluntary enforcement (by allowing the "investor" to commit a sum to escrow in a trust game) can lead to efficient outcomes. These disparate findings are part of the motivation for this paper.…”

Section: Trust and Reciprocity In The Laboratorymentioning

confidence: 99%

Satisfaction Guaranteed: When Moral Hazard meets Moral Preferences

Andreoni¹

2017

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Theorists and policy analysts have convincingly argued that greater trust makes a more efficient society by eliminating costly contracts or expensive reputations. Concurrently, experiments suggest that reciprocity is a potent substitute for law when compliance with contracts is imperfectly enforced. This paper examines these issues within the context of a common trustbuilding contract device: satisfaction guaranteed. We find that satisfaction guaranteed indeed builds trust and improves efficiency. Interestingly, sellers offering a guarantee are more trustworthy than those who don't, even when honoring it is fully voluntary, but the guarantee only elicits the trust of buyers when it has legal backing.A online appendix is available at http://www.nber.org/data-appendix/w23352 1 See Mayzlin et al. (2014) for empirical support. 2 Che (1996) summarizes a survey of Illinois retailers that report 78% give cash refunds with a receipt, 32% give cash refunds even without a receipt. Twenty-three percent limit the return period, and others limit returns to merchandise credit. However, fewer than 5% say all sales are final.

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Efficiency in the trust game: an experimental study of precommitment

Cited by 21 publications

References 35 publications

Words speak louder than money

Words speak louder than money

Building Trust—One Gift at a Time

Satisfaction Guaranteed: When Moral Hazard meets Moral Preferences

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