Knowing When to Trust Others: An ERP Study of Decision Making After Receiving Information from Unknown People

Abstract:     
To address the neurocognitive mechanisms that underlie choices made after receiving information from an anonymous individual, reaction times (Experiment 1) and event-related brain potentials (Experiment 2) were recorded as participants played 3 variants of the Coin Toss game. In this game, participants guess the outcomes of unseen coin tosses after a person in another room (dubbed "the reporter") observes the coin toss outcomes and then sends reports (which may or may not be truthful) to participants about whether the coins landed on heads or tails. Participants knew that the reporter's interests either were aligned with their own (Common Interests), opposed to their own (Conflicting Interests), or opposed to their own but that the reporter was penalized every time he or she sent a false report about the coin toss outcome (Penalty for Lying). In the Common Interests and Penalty for Lying conditions, participants followed the reporter's reports over 90% of the time, in contrast to less than 59% of the time in the Conflicting Interests condition. Reaction time results indicated that participants took similar amounts of time to respond in the Common Interests and Penalty for Lying conditions and that they were reliably faster than in the Conflicting Interests condition. Event-related potentials (ERPs) timelocked to the reporter's reports revealed a larger P2, P3, and LPC response in the Common Interests condition than in the other two, suggesting that participants' brains processed the reporter's reports differently in the Common Interests condition, relative to the other two conditions. Results suggest that even when people behave as if they trust information, they consider communicative efforts of individuals whose interests are aligned with their own to be slightly more informative than those of individuals who are made trustworthy by an institution, such as a penalty for lying.

Keywords: trust, communication, game theory, social neuroscience, institution, learning, P3, lying, penalty, experiment, ERP, EEG, brain, cognition

JEL Classifications: C70, C90, C91, C99, D72, D80, D81, D83, K00

Accepted Paper Series