Intentionality Matters for Third-Party Punishment but not Compensation in Trust Games

Abstract

We investigate how the intentionality of investors or trustees’ actions affects third
party compensation and punishment interventions after a trust game. Investors
and trustees are randomly assigned to conditions where they either make
intentional choices or their choices are made by a random machine. Overall, we
find that lack of reciprocity is punished more than lack of trust, and third parties
exhibit strong preferences for compensation over punishment. We find that only
the punishment choice is affected by the intentionality of parties’ actions, whereas
compensation occurs in all conditions, whether lack of trust or reciprocity has been
intentional or unintentional.

Keywords: Social norms; Trust game; Compensation; Punishment; Reciprocity; Normative expectations

JEL Classification: C72; C91; D63