Words Speak Louder Than Money

Servátka, Maroš; Tucker, Steven James; Vadovic, Radovan

doi:10.2139/ssrn.1291582

Words Speak Louder Than Money

University of Canterbury Working Paper Series

29 Pages Posted: 30 Oct 2008 Last revised: 13 Apr 2011

See all articles by Maroš Servátka

Maroš Servátka

Macquarie Graduate School of Management - MGSM Experimental Economics Laboratory

Steven James Tucker

University of Waikato Management School - Economics

Radovan Vadovic

Instituto Tecnológico Autónomo de México (ITAM)

Date Written: April 10, 2011

Abstract

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

Servátka, Maroš and Tucker, Steven James and Vadovic, Radovan, Words Speak Louder Than Money (April 10, 2011). University of Canterbury Working Paper Series. Available at SSRN: https://ssrn.com/abstract=1291582 or http://dx.doi.org/10.2139/ssrn.1291582