Trust under Request versus Trust with Threat

41 Pages Posted: 6 May 2022

See all articles by Yunwen He

Yunwen He

Tsinghua University

Zihui Wang

Tsinghua University, School of Economics & Management

Bin Xu

Zhejiang Gongshang University (ZJGSU) - School of Public Administration

Jie Zheng

Tsinghua University - School of Economics & Management

Date Written: January 5, 2022

Abstract

We study the effects of request and threat on trust and trustworthy behavior in an investment game, both theoretically and experimentally. Consistent with the theoretical predictions, the experimental results show that the request mechanism is able to lift up the overall trust level, due to the joint work of a Request-fulfilling effect and an Expectation-raising effect, together with its failure to prevent the opportunists from succumbing to moral hazard. In comparison, the threat mechanism increases trust and trustworthiness to a higher level and performs quite well in a relatively long term. The option of threat can cause pecuniary loss in the presence of punitive execution (the Payoff-destructing effect), which partially counteracts the gains from investment expansions (the Trust-boosting effect). As a consequence, the request mechanism and the threat mechanism achieve similar positive results regarding efficiency, but a higher level of trade fairness is achieved under the threat mechanism.

Keywords: Trust, Reciprocity, Request, Threat

JEL Classification: C72, C91, D91

Suggested Citation

He, Yunwen and Wang, Zihui and Xu, Bin and Zheng, Jie, Trust under Request versus Trust with Threat (January 5, 2022). Available at SSRN: https://ssrn.com/abstract=4099357 or http://dx.doi.org/10.2139/ssrn.4099357

Yunwen He

Tsinghua University ( email )

Beijing
China

Zihui Wang

Tsinghua University, School of Economics & Management ( email )

Beijing
China

Bin Xu

Zhejiang Gongshang University (ZJGSU) - School of Public Administration ( email )

Hangzhou, Zhejiang 310018
China

Jie Zheng (Contact Author)

Tsinghua University - School of Economics & Management ( email )

Beijing, 100084
China

HOME PAGE: http://jzheng.weebly.com/

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