Whatever you say, your reputation precedes you: observation and cheap talk in the trust game

Juergen Bracht, Nick Feltovich

Research output: Contribution to journalArticle

50 Citations (Scopus)

Abstract

Behavior in trust games has been linked to general notions of trust and trustworthiness, important components of social capital. In the equilibrium of a trust game, the investor does not invest, foreseeing that the allocator would keep all of the returns. We use a human-subjects experiment to test the effects of changes to the game designed to increase cooperation and efficiency. We add a pre-play stage in which the investor receives a cheap-talk message from the allocator, observes the allocator's previous decision, or both. None of these changes alter the game's theoretical predictions. We find that allowing observation results in substantially higher cooperation and efficiency, but cheap talk has little effect.
Original languageEnglish
Pages (from-to)1036-1044
Number of pages9
JournalJournal of Public Economics
Volume93
Issue number9-10
Early online date25 Jul 2009
DOIs
Publication statusPublished - Oct 2009

Keywords

  • experiment
  • trust game
  • cheap talk
  • observation
  • mechanism

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