Trust, communication and contracts: An experiment

Avner Ben-Ner, Louis Putterman

Research output: Contribution to journalArticlepeer-review

79 Scopus citations

Abstract

In the one-shot trust or investment game without opportunities for reputation formation or contracting, economic theory predicts no trusting because there is no incentive for trustworthiness. Under these conditions, theory predicts (a) no effect of pre-play communication, and (b) universal preference for moderate cost binding contracts over interacting without contracts. We introduce the opportunities to engage in pre-play communication and to enter binding or non-binding contracts, and find (a) communication increases trusting and trustworthiness, (b) contracts are largely unnecessary for trusting and trustworthy behaviors and are eschewed by many players, (c) more trusting leads to higher earnings, and (d) both trustors and trustees favor "fair and efficient" proposals over the more unequal proposals predicted by theory.

Original languageEnglish (US)
Pages (from-to)106-121
Number of pages16
JournalJournal of Economic Behavior and Organization
Volume70
Issue number1-2
DOIs
StatePublished - May 1 2009

Keywords

  • Commitment
  • Communication
  • Reciprocity
  • Trust
  • Trust game
  • Trustworthiness

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