Information Sharing, Advice Provision or Delegation: What Leads to Higher Trust and Trustworthiness?

Abstract

In many market settings, a customer often obtains assistance from a supplier (or service provider) in order to make better-informed decisions regarding the supplier's product (or service). Because the two parties often have conflicting pecuniary incentives, customer trust and supplier trustworthiness play important roles in the success of these interactions. We investigate whether and how the process through which assistance is provided can foster trust and trustworthiness and facilitate better cooperation. We compare three prevalent assistance processes: information sharing, advice provision, and delegation. We propose that, even if the pecuniary incentives of both parties do not vary from one assistance process to another, the assistance process itself impacts the customer's and supplier's non-pecuniary motives that give rise to trust and trustworthiness. Consequently, the assistance process affects the level of cooperation and payoffs. We test our behavioral predictions through laboratory experiments based on a retail distribution setting. We quantify the impact of different assistance processes on trust, trustworthiness and channel performance, and identify the underlying drivers of those impacts. Our results offer insight into the role of the assistance process in managing supplier assistance effectively, and why certain assistance processes may lead to more successful outcomes than others even if the pecuniary incentives remain unaltered.

Keywords: Advice, Behavioral Economics, Delegation, Distribution Channel, Experimental Economics, Information Sharing, Trust