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Incentivising trust

Author

Listed:
  • Pamela Lenton

    (Department of Economics, The University of Sheffield)

  • Paul Mosley

    (Department of Economics, The University of Sheffield)

Abstract
We argue that trust can be incentivised by measures which increase the ability of trusters to protect themselves against risk. We work within the framework originally established by Berg, Dickhaut and McCabe (1995) in which trust is measured experimentally as the ability to generate reciprocity in response to an initial offer of money within a two-person game. An incentive is conveyed both by means of variations in the multiplier applied to the first player’s initial offer and by giving the first player the opportunity to insure themselves against the possibility that the second player will fail to reciprocate their initial offer. Measured trust is strongly responsive to both these incentives. Thus third parties have the ability to influence the outcome of the game, not only, as in the analysis of Charness et al (2008), by punishing failure to reciprocate and rewarding ‘good’ initial offers, but also by offering protection which strengthens the first player’s risk efficacy, or ratio of assets to risk.

Suggested Citation

  • Pamela Lenton & Paul Mosley, 2009. "Incentivising trust," Working Papers 2009004, The University of Sheffield, Department of Economics, revised Mar 2009.
    • Handle: RePEc:shf:wpaper:2009004
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    References listed on IDEAS

    as
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    Cited by:

    1. Johnson, Noel D. & Mislin, Alexandra A., 2011. "Trust games: A meta-analysis," Journal of Economic Psychology, Elsevier, vol. 32(5), pages 865-889.
    2. Xu, Cheng, 2021. "Effects of urbanization on trust: Evidence from an experiment in the field," Journal of Economic Psychology, Elsevier, vol. 87(C).
    3. Pamela Lenton & Mike Masiye & Paul Mosley, 2017. "Taxpayer’s dilemma: how can ‘fiscal contracts’ work in developing countries?," Working Papers 2017004, The University of Sheffield, Department of Economics.
    4. Eric van Dijk & Varia Makagonova & Erik W. de Kwaadsteniet & Manon Schutter, 2017. "Deterrence-based trust in bargaining: Introducing a new experimental paradigm," Journal of Trust Research, Taylor & Francis Journals, vol. 7(1), pages 71-89, January.
    5. Joanna Paliszkiewicz, 2012. "Managers’ Orientation on Trust and Organizational Performance," Jindal Journal of Business Research, , vol. 1(2), pages 153-161, December.

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    More about this item

    Keywords

    Experimental economics; Game theory; Risk; Reciprocity;
    All these keywords.

    JEL classification:

    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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