Crowding Out Trust: The Adverse Effect of Verification: An Experiment

Guerra, Gerardo A.

doi:10.2139/ssrn.331861

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Crowding Out Trust: The Adverse Effect of Verification: An Experiment

U of Oxford, Economics Discussion Paper No. 98

21 Pages Posted: 6 Nov 2002

See all articles by Gerardo A. Guerra

Gerardo A. Guerra

University of Oxford - Department of Economics

Date Written: April 2002

Abstract

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

Guerra, Gerardo A., Crowding Out Trust: The Adverse Effect of Verification: An Experiment (April 2002). U of Oxford, Economics Discussion Paper No. 98, Available at SSRN: https://ssrn.com/abstract=331861 or http://dx.doi.org/10.2139/ssrn.331861