Neuroeconomic Foundations of Trust and Social Preferences

IZA Discussion Paper No. 1641

IEW Working Paper No. 221

17 Pages Posted: 24 Jun 2005

See all articles by Ernst Fehr

Ernst Fehr

University of Zurich - Department of Economics

Michael Kosfeld

Goethe University Frankfurt; IZA Institute of Labor Economics; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); University of Bonn - Center for Development Research (ZEF)

Urs Fischbacher

University of Konstanz - Faculty of Economics and Statistics

Date Written: June 2005

Abstract

This paper discusses recent neuroeconomic evidence related to other- regarding behaviors and the decision to trust in other people's other-regarding behavior. This evidence supports the view that people derive nonpecuniary utility (i) from mutual cooperation in social dilemma (SD) games and (ii) from punishing unfair behavior. Thus, mutual cooperation and the punishment of free riders in SD games is not irrational, but better understood as rational behavior of people with corresponding social preferences. We also report the results of a recent study that examines the impact of the neuropeptide Oxytocin (OT) on trusting and trustworthy behavior in a sequential SD. Animal studies have identified Oxytocin as a hormone that induces prosocial approach behavior, suggesting that it may also affect prosocial behavior in humans. Indeed, the study shows that subjects given Oxytocin exhibit much more trusting behavior, suggesting that OT has a direct impact on certain aspects of subjects' social preferences. Interestingly, however, although Oxytocin affects trusting behavior, it has no effect on subjects' trustworthiness.

Keywords: Neuroeconomic , Foundations of Trust, Social Preferences

JEL Classification: A13, C90

Suggested Citation

Fehr, Ernst and Kosfeld, Michael and Fischbacher, Urs, Neuroeconomic Foundations of Trust and Social Preferences (June 2005). IZA Discussion Paper No. 1641, IEW Working Paper No. 221, Available at SSRN: https://ssrn.com/abstract=747884 or http://dx.doi.org/10.2139/ssrn.747884

Ernst Fehr (Contact Author)

University of Zurich - Department of Economics ( email )

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Switzerland
+41 1 634 3709 (Phone)
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Michael Kosfeld

Goethe University Frankfurt ( email )

Faculty of Economics and Business Administration
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Frankfurt am Main, 60323
Germany

IZA Institute of Labor Economics

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Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute) ( email )

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Munich, DE-81679
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University of Bonn - Center for Development Research (ZEF) ( email )

Walter-Flex-Str. 3
Bonn, NRW 53113
Germany

Urs Fischbacher

University of Konstanz - Faculty of Economics and Statistics ( email )

Universitaetsstr. 10
78457 Konstanz
Germany

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