Words Speak Louder Than Money
University of Canterbury Working Paper Series
29 Pages Posted: 30 Oct 2008 Last revised: 13 Apr 2011
Date Written: April 10, 2011
Should one use words or money to foster trust of the other party if no means of enforcing trustworthiness are available? This paper reports an experiment studying the effectiveness of two types of mechanisms for promoting trust: a costly gift and a costless message as well as their mutual interaction. We nest our findings in the standard version of the investment game. Our data provide evidence that while both stand-alone mechanisms enhance trust, and a gift performs significantly worse than a message. Moreover, when a gift is combined with sending a message, it can be counterproductive.
Keywords: Communication; deposit; experimental economics trust, trustworthiness
JEL Classification: C70, C91
Suggested Citation: Suggested Citation