Trust Among Strangers

UC Berkeley Xlab Working Paper No. XL05-001

50 Pages Posted: 21 Apr 2005

See all articles by Teck Ho

Teck Ho

University of California, Berkeley - Haas School of Business

Keith W. Weigelt

University of Pennsylvania - Management Department

Date Written: August 2004

Abstract

The trust building process is basic to social science. We investigate it in a laboratory setting using a novel multi-stage trust game where social gains are achieved if players trust each other in each stage. And in each stage, players have an opportunity to appropriate these gains or be trustworthy by sharing them. Players are strangers because they do not know the identity of others and they will not play them again in the future. Thus there is no prospect of future interaction to induce trusting behavior. So, we study the trust building process where there is little scope for social relations and networks. Standard game theory, which assumes all players are opportunistic, untrustworthy, and should have zero trust for others is used to construct a null hypothesis. We test whether people are trusting or trustworthy and examine how inferring the intentions of those who trust affects trustworthiness. We also investigate the effect of stake on trust, and study the evolution of trust. Results show subjects exhibit some degree of trusting behavior though a majority of them are not trustworthy and claim the entire social gain. Players are more reluctant to trust in later stages than in earlier ones and are more trustworthy if they are certain of the trustee's intention. Surprisingly, subjects are more trusting and trustworthy when the stake size increases. Finally, we find the sub-population who invests in initiating the trust building process modifies its trusting behavior based on the relative fitness of trust.

Keywords: Experimental Economics, Behavioral Economics

JEL Classification: C79, C91, D64

Suggested Citation

Ho, Teck and Weigelt, Keith, Trust Among Strangers (August 2004). UC Berkeley Xlab Working Paper No. XL05-001, Available at SSRN: https://ssrn.com/abstract=702662 or http://dx.doi.org/10.2139/ssrn.702662

Teck Ho (Contact Author)

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

Keith Weigelt

University of Pennsylvania - Management Department ( email )

The Wharton School
Philadelphia, PA 19104-6370
United States
215-898-6369 (Phone)

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