Trust Reciprocity and Interpersonal History: Fool Me Once Shame on You Fool Me Twice Shame on Me
Posted: 27 Feb 1998
In the investment game subjects in room A decide how much of their $10 show up fee to invest with an anonymous counterpart in room B. Each dollar is known to triple by the time it reached room B. Subjects in room B then decide how much of the tripled money they received to keep and how much to pay back. Subgame perfection predicts that room B subjects will send back zero thus room A subjects should invest zero. Previous studies with sixty pairs of subjects demonstrate the existence of trust i.e. room A subjects invest over $5 on average and reciprocity i.e. room B subjects often send back more than was invested.
JEL Classification: L14, M41
Suggested Citation: Suggested Citation