Trust and Reciprocity Decisions

Abstract

This paper examines trusting actions and reciprocity responses in the two-person Trust Game. Two experiments test a model that suggests that individuals in social and economic interactions are likely to view the situation from their own unique perspective. The results demonstrate that trustors focus primarily on the risk associated with trusting, while trusted parties—those who are in a position to reciprocate—base their decisions on the level of benefits they have received. Specifically, trusting is more likely when risk is low, but the likelihood of trust does not depend on the level of benefit that trust provides to trusted parties. Meanwhile, reciprocity is more likely when the benefit provided is high, but does not depend on the level of risk the trustor faced. Neither party is particularly sensitive to the factors that affect their counterpart’s decision. Furthermore, trustors underestimate the extent to which the level of benefits they provide might affect the trusted party’ decision to reciprocate. Responses to a post-experimental questionnaire provide additional support for the proposition that the parties view the interaction from markedly different perspectives. Implications of this are discussed. TS - BibTeX