Trust and Risk Revisited

39 Pages Posted: 15 Nov 2014 Last revised: 13 Dec 2016

See all articles by Kim Fairley

Kim Fairley

Institute of Cognitive Sciences, University of Colorado Boulder

Alan G. Sanfey

University of Arizona

Jana Vyrastekova

Radboud University Nijmegen - Department of Economics

Utz Weitzel

Utrecht University - Utrecht University School of Economics; Radboud University - Economics Department, IMR

Date Written: November 14, 2014

Abstract

A trustor faces a risky choice in the trust game when he acts upon his belief regarding the chances of betrayal by the trustee. Despite intensive research there is no clear evidence for a link between lottery risk preferences and risk involved in trusting others. We argue that this is due to crucial differences between the risk measurements in the two settings. Trusting is giving up control to a human while lottery risk arises from a mechanistic randomization device. We propose a risky trust game that experimentally measures risk in the same context as the standard trust game, but nevertheless reduces the trust decision to objective risk. Our results show that transfers in the trust game can indeed be explained by individual risk attitudes elicited with the risky trust game, while lottery risk preferences have no explanatory power.

Keywords: Trust, trust game, decision making under uncertainty, risk, ambiguity, sources of uncertainty

JEL Classification: C07, C09, D08

Suggested Citation

Fairley, Kim and Sanfey, Alan G. and Vyrastekova, Jana and Weitzel, Utz, Trust and Risk Revisited (November 14, 2014). Journal of Economic Psychology, Vol. 57, 2016. Available at SSRN: https://ssrn.com/abstract=2524281 or http://dx.doi.org/10.2139/ssrn.2524281

Kim Fairley (Contact Author)

Institute of Cognitive Sciences, University of Colorado Boulder ( email )

CO
United States

Alan G. Sanfey

University of Arizona ( email )

Department of History
Tucson, AZ 85721
United States

Jana Vyrastekova

Radboud University Nijmegen - Department of Economics ( email )

Nijmegen, 6500 HK
Netherlands

Utz Weitzel

Utrecht University - Utrecht University School of Economics ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, 3584 EC
Netherlands

Radboud University - Economics Department, IMR ( email )

Nijmegen, 6500 HK
Netherlands

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