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TRUST, RECIPROCITY, AND RULES
Author(s) -
Rietz Thomas A.,
Schniter Eric,
Sheremeta Roman M.,
Shields Timothy W.
Publication year - 2018
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/ecin.12512
Subject(s) - reciprocity (cultural anthropology) , trustworthiness , reciprocal , economics , microeconomics , welfare , dictator game , simple (philosophy) , law and economics , social psychology , psychology , market economy , linguistics , philosophy , epistemology
Many economic interactions rely on trust and trust violations can have serious economic consequences. Simple minimum standard rules are attractive because they prevent egregious trust violations. However, they may undermine more trusting and reciprocal (trustworthy) behavior that otherwise would have occurred, leading to worse outcomes. In an experimental trust game, we test the efficacy of exogenously imposed minimum standard rules. Rules damage trust and reciprocity, reducing economic welfare. While sufficiently restrictive rules restore welfare, trust and reciprocity never return. Results indicate that participants are concerned about payoffs while also using the game to learn about trust and trustworthiness of others. ( JEL C72, C90, D63, D64, L51)