Trust Games

To trust someone implies taking some risk. To be trustworthy implies that you will try to reduce risks to those who trust you even if it is costly to you to do so. For economists trust reduces the transaction cost of trading. In,

Berg, Joyce, John Dickhaut, and Kevin McCabe, "Trust, Reciprocity, and Social History," Games and Economic Behavior, (10)1995, pp. 122-142,

We designed an experiment to study individuals' propensity to be trusting and to be trustworthy in a task we call the investment game. In this game two subjects are each given $10 as a show up fee. One of the subjects is told that he or she will be decision maker one (DM1), and can send any amount (all, none, or some) of the $10 to the other subject (decision maker two, DM2). The rules are simple. Every dollar sent will be tripled by the experimenter before it reaches DM2, who then gets to decide how much of the tripled money to keep and how much to send back to DM1. After DM2’s decision the game is over and subjects leave. We designed the experiment so it was double-blind meaning that neither the subjects, nor the experimenter, new who was matched together, or what subject made what decision. Game theory predicts that as long as DM2 prefers more money to less, DM2 should keep all the money that is sent. Of course, DM1 should then send nothing. But this is now what happened. On average DM1’s send over $5 and roughly one third of the DM2’s reciprocated by sending back more than was originally sent even though the double-blind condition implied no one would know what DM2 really did.

Comments

[Scott N]

Isn't this how we are raised. We are taught from a very young age to trust people. We are also raised to believe that when you do something nice to someone, something nice will happen to you. We also put value on things. $10 you didn't earn, but have a chance to make a return on, wouldn't be valuable to most people. Would the results differ if you gave DM1 $10,000?

[norak uong]

Do you think that the rational self-interest assumption, which is fundamental to economics, actually causes people to be selfish? If policymakers, lawmakers, etc treat people as if they were all selfish, then for a citizen to assimilate in a world in which they are expected to be selfish, they have to be selfish.

[Hannes Kvaran]

Did I get this right? 2/3 of the DM1s lost money due to their foolish trust in DM2?

Do you have a more detailed breakdown of the responses?

Hannes Kvaran

[Will]

I don't think they lost money because of the multiplier. Presumably both DM1 & DM2 increased their funds,

Will

[chess]

put sum trust games on then

[Zack Lynch]

Kevin,

You don't need to post this, but you have a small typo in this post... 'now' should be 'not'.

.....Of course, DM1 should then send nothing. But this is now what happened.

Zack

[Reigan]

this is no help what so ever get some help!

[Kevin H]

I recently participated in an experiment exactly like the one mentioned above. I had no prior knowledge to the trust game, nor did I have any background in studying game theory. As DM1, I sent all 10 dollars to DM2, hoping that we could each make $15 off of it. I was surprised, however, to receive all $30 back (DM2 left with only their $10 show-up fee).

Perhaps this case illustrates a belief that one should not accept gifts or take what was not theirs, even when offered free from social consequence.