Trust, Risk and Betrayal
Harvard University - Harvard Kennedy School (HKS)
Richard J. Zeckhauser
Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)
Using experiments, we examine whether the decision to trust a stranger in a one-shot interaction is equivalent to taking a risky bet, or if a trust decision entails an additional risk premium to balance the costs of trust betrayal. We compare a binary-choice Trust game with a structurally identical, binary-choice Risky Dictator game with good or bad outcomes. We elicit individuals' minimum acceptable probabilities (MAPs) of getting the good outcome such that they would prefer the chance to the sure payoff. First movers state higher MAPs in the Trust game than in situations where nature determines the outcome.
Number of Pages in PDF File: 28
Keywords: Trust, risk, dictator game, betrayal cost, experiments
JEL Classification: C72, C91working papers series
Date posted: November 6, 2003
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