Contracting in the Trust Game

33 Pages Posted: 24 Jul 2010

See all articles by Juergen Bracht

Juergen Bracht

University of Aberdeen; University of Edinburgh - Scottish Institute for Research in Economics (SIRE)

Date Written: July 22, 2010

Abstract

We present a simple mechanism that can be implemented in a simple experiment. In a modified trust game, the allocator can offer to pay the investor to cooperate. The mechanism is successful at implementing efficient outcomes: participants manage to achieve an efficient outcome, when this is possible, two-thirds of the time. While these results are encouraging, we find evidence that both concerns for fairness and motivation crowding out distort the incentives presented in the mechanism.

Keywords: compensation mechanism, side payment, trust game, signaling, crowding out, concerns for equity taste for cooperation

JEL Classification: C92, D62, H42

Suggested Citation

Bracht, Juergen, Contracting in the Trust Game (July 22, 2010). Available at SSRN: https://ssrn.com/abstract=1647006 or http://dx.doi.org/10.2139/ssrn.1647006

Juergen Bracht (Contact Author)

University of Aberdeen ( email )

Dunbar Street
Aberdeen, Scotland AB24 3QY
United Kingdom

HOME PAGE: http://www.abdn.ac.uk/~pec202/juergenBracht.htm

University of Edinburgh - Scottish Institute for Research in Economics (SIRE) ( email )

First floor - Room 1.10
31 Buccleuch Place
Edinburgh, Scotland EH8 9JT
United Kingdom

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