Restoring Damaged Trust with Promises, Atonement and Apology

Abstract

In an experiment using two consecutive trust games, we study how “cheap” signals such as promises and messages are used to restore damaged trust and encourage new trust where it did not previously exist. In these games, trustees made non-binding promises of investment-contingent returns, then investors decided whether to invest, and finally trustees decided how much to return. After an unexpected second game was announced, but before it commenced, trustees could send a one-way message. This naturalistic quasi-experimental design allowed us to observe the endogenous emergence of trust-relevant behaviors and focus on naturally occurring remedial strategies used by promise-breakers and distrusted trustees, their effects on investors, and subsequent outcomes. In the first game 16.6% of trustees were distrusted and 18.8% of trusted trustees broke promises. Trustees distrusted in the first game used promises closer to equal splits and messaging to encourage trust in the second game. To restore damaged trust, promise-breakers used larger new promises (signals of intended atonement) and messaging (usually with apology). On average, investments in each game paid off for investors and trustees, suggesting that cheap signals foster profitable trust-based exchanges in these economic games.

Keywords: promise, atonement, apology, cheap talk, cheap signals, remedial strategies, trust game, reciprocity, experiments

JEL Classification: C72, C91, D74, D89