Experimental Economics

, Volume 15, Issue 4, pp 571–588

What you don’t know won’t hurt you: a laboratory analysis of betrayal aversion

Authors

    • Virginia Tech Carilion Research InstituteVirginia Polytechnic Institute and State University
  • Daniel Houser
    • Interdisciplinary Center for Economic ScienceGeorge Mason University
Article

DOI: 10.1007/s10683-012-9314-z

Cite this article as:
Aimone, J.A. & Houser, D. Exp Econ (2012) 15: 571. doi:10.1007/s10683-012-9314-z

Abstract

Recent research argues “betrayal aversion” leads many people to avoid risk more when a person, rather than nature, determines the outcome of uncertainty. However, past studies indicate that factors unrelated to betrayal aversion, such as loss aversion, could contribute to differences between treatments. Using a novel experiment design to isolate betrayal aversion, one that varies how strategic uncertainty is resolved, we provide rigorous evidence supporting the detrimental impact of betrayal aversion. The impact is substantial: holding fixed the probability of betrayal, the possibility of knowing that one has been betrayed reduces investment by about one-third. We suggest emotion-regulation underlies these results and helps to explain the importance of impersonal, institution-mediated exchange in promoting economic efficiency.

Keywords

Betrayal aversion Risk Trust Emotion regulation

JEL Classification

C91 D03 D81

Supplementary material

10683_2012_9314_MOESM1_ESM.docx (30 kb)
(DOCX 30 kB)

Copyright information

© Economic Science Association 2012