Trust, Reciprocity, and Rules

17 Pages Posted: 5 Jun 2018

See all articles by Thomas Rietz

Thomas Rietz

University of Iowa - Henry B. Tippie College of Business

Eric Schniter

Chapman University - George L. Argyros School of Business and Economics - Economic Science Institute

Roman M. Sheremeta

Case Western Reserve University

Timothy W. Shields

Chapman University - George L. Argyros School of Business & Economics; Chapman University - Economic Science Institute

Multiple version iconThere are 2 versions of this paper

Date Written: July 2018

Abstract

Many economic interactions rely on trust and trust violations can have serious economic consequences. Simple minimum standard rules are attractive because they prevent egregious trust violations. However, they may undermine more trusting and reciprocal (trustworthy) behavior that otherwise would have occurred, leading to worse outcomes. In an experimental trust game, we test the efficacy of exogenously imposed minimum standard rules. Rules damage trust and reciprocity, reducing economic welfare. While sufficiently restrictive rules restore welfare, trust and reciprocity never return. Results indicate that participants are concerned about payoffs while also using the game to learn about trust and trustworthiness of others.

JEL Classification: C72, C90, D63, D64, L51

Suggested Citation

Rietz, Thomas A. and Schniter, Eric and Sheremeta, Roman M. and Shields, Timothy W., Trust, Reciprocity, and Rules (July 2018). Economic Inquiry, Vol. 56, Issue 3, pp. 1526-1542, 2018. Available at SSRN: https://ssrn.com/abstract=3188578 or http://dx.doi.org/10.1111/ecin.12512

Thomas A. Rietz (Contact Author)

University of Iowa - Henry B. Tippie College of Business ( email )

C108 PBB, Suite S244
Iowa City, IA 52242-1994
United States
319-335-0856 (Phone)
319-335-3690 (Fax)

HOME PAGE: http://tippie.uiowa.edu/people/profile/profile.aspx?id=195021

Eric Schniter

Chapman University - George L. Argyros School of Business and Economics - Economic Science Institute ( email )

One University Dr.
Orange, CA 92866
United States

HOME PAGE: http://sites.google.com/site/ericschniter/

Roman M. Sheremeta

Case Western Reserve University ( email )

10900 Euclid Ave.
Cleveland, OH 44106
United States

Timothy W. Shields

Chapman University - George L. Argyros School of Business & Economics ( email )

One University Drive
Orange, CA 92866
United States
714.289.2092 (Phone)

HOME PAGE: http://sites.google.com/site/timothywshields/

Chapman University - Economic Science Institute ( email )

One University Dr.
Orange, CA 92866
United States

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