Is Trust a Bad Investment?

43 Pages Posted: 20 Feb 2004

See all articles by Nava Ashraf

Nava Ashraf

Harvard University - Business School (HBS)

Iris Bohnet

Harvard University - Harvard Kennedy School (HKS)

Nikita Piankov

New Economic School (NES)

Date Written: November 2003

Abstract

This paper examines whether trust is an investment decision under uncertainty, based on the expectation of trustworthiness, and whether trustworthiness is reciprocity, conditional on one's counterpart's behavior. In experiments run in Russia, South Africa and the United States, we find that only about one third of the subjects who trust expect to make money and that reciprocity matters in the United States but hardly in Russia and South Africa. On average, trust and trustworthiness behavior is significantly related to warm-glow kindness - with the exception of women's trust, which is almost exclusively accounted for by expectations of return. One-shot trust appears to pay for some but not for others.

Keywords: Trust, kindness, reciprocity, gender, cross-cultural experiments

JEL Classification: C72, C9

Suggested Citation

Ashraf, Nava and Bohnet, Iris and Piankov, Nikita Evgenjevich, Is Trust a Bad Investment? (November 2003). Available at SSRN: https://ssrn.com/abstract=478881 or http://dx.doi.org/10.2139/ssrn.478881

Nava Ashraf

Harvard University - Business School (HBS) ( email )

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617-495-5058 (Phone)
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Iris Bohnet (Contact Author)

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States
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Nikita Evgenjevich Piankov

New Economic School (NES) ( email )

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117418 Moscow
Russia
(7-095) 332-4490 (Phone)
(7-095) 129-3722 (Fax)

HOME PAGE: http://www.economics.harvard.edu/~npiankov/

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