Verified Trust: Reciprocity, Altruism and Noise in Trust Games

Abstract:     
Behavioral economists have come to recognize that reciprocity, the interaction of trust and trustworthiness, is a distinct and economically relevant component of individual preferences alongside selfishness and altruism. This recognition is principally due to observed decisions in experimental 'trust games'. However, recent research has cast doubt on the explanatory power of trust as a determinant of those decisions, suggesting that altruism may explain much of what 'looks like' trust. Moreover, empirical tests for alternative behavioral determinants can be sensitive to experimental bias due to differences in protocols and framing. Therefore, we propose discriminatory tests for altruism and trust that can be based on within-treatment and within-subject comparisons, and we control for group attributes of experimental subjects. Our results support trust (i.e., expected reciprocation) as the dominant motivation for 'trust like' decisions.

Number of Pages in PDF File: 37

Keywords: Reciprocity, altruism, trust game, experimental error

JEL Classification: C91, D63, D64

working papers series