Crowding Out Trust: The Adverse Effect of Verification: An Experiment
U of Oxford, Economics Discussion Paper No. 98
21 Pages Posted: 6 Nov 2002
Date Written: April 2002
Through an experiment, this study investigates the effects that verification has on honest traders. This paper demonstrates that by reducing the scope for trust, verification can have a negative effect on the behaviour of honest individuals. Specifically, the analysis shows that trustworthy agents are willing to punish or seek compensation from those that deprive them of trust opportunities through the use of verification. Regulatory implications are discussed.
Keywords: Verification, Trust, Ultimatum Bargaining, Experiments
JEL Classification: C72, C78, C90, D18, D82, L86
Suggested Citation: Suggested Citation