Three-Player Trust Game with Insider Communication
Economic Inquiry, Forthcoming
46 Pages Posted: 28 Dec 2012
Date Written: December 27, 2012
We examine behavior in a three-player trust game in which the first player may invest in the second and the second may invest in the third. Any amount sent from one player to the next is tripled. The third player decides the final allocation among three players. The baseline treatment with no communication shows that the first and second players send significant amounts and the third player reciprocates. Allowing insider communication between the second and the third players increases cooperation between these two. Interestingly, there is an external effect of insider communication: the first player who is outside communication sends 54% more and receives 289% more than in the baseline treatment. As a result, insider communication increases efficiency from 44% to 68%.
Keywords: three-player trust games, experiments, reciprocity, communication
JEL Classification: C72, C91, D72
Suggested Citation: Suggested Citation