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Playing the trust game with other people’s money

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Abstract

We experimentally investigate to what extent people trust and honor trust when they are playing with other people’s money (OPM). We adopt the well-known trust game by Berg et al. (in Games Econ. Behav. 10:122–142, 1995), with the difference that the trustor (sender) who sends money to the trustee (receiver) does this on behalf of a third party. We find that senders who make decisions on behalf of others do not behave significantly different from senders in our baseline trust game who manage their own money. But receivers return significantly less money when senders send a third party’s money. As a result, trust is only profitable in the baseline trust game, but not in the OPM treatment. The treatment effect among the receivers is gender specific. Women return significantly less money in OPM than in baseline, while there is no such treatment effect among men. Moreover, women return significantly less than men in the OPM treatment.

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Fig. 1
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Notes

  1. See Fehr et al. (1993), Berg et al. (1995) and the large body of evidence thereafter. Fehr and Gächter (2000) provide an early overview.

  2. See Brandts and Sola (2001), Falk et al. (2003), McCabe et al. (2003), Offerman (2002) and Charness and Levine (2007). These studies support intention-based models of reciprocity such as McCabe and Smith (2000), Dufwenberg and Kirchsteiger (2004) and Falk and Fischbacher (2006).

  3. We use the term “client” in the experiment, but in a principal-agent framework, the client is the principal, while the sender is her agent.

  4. Hamman et al. (2010) find that delegation may increase profit also in the absence of such punishment reduction mechanisms. They show that a principal may hire an agent to take self-interested actions that he or she would be reluctant to take themselves.

  5. Positive reciprocity on behalf of others is also studied by Song (2008), but in a trust game where both senders and receivers make decisions on behalf of a group. Like us, she finds less reciprocity, but this is mainly attributed to the relationship between the receiver and the group he/she is making decisions for.

  6. Only one study, Bellemare and Kröger (2007), finds that men are more reciprocal than women. Some studies found no gender differences in reciprocal behavior (Clark and Sefton 2001; Cox and Deck 2006; Eckel and Wilson 2004a, 2004b; Bohnet 2007; Migheli 2007; Innocenti and Pazienza 2006; Slonim and Guillen 2010), while quite a few studies have found that women are more reciprocal than men (Croson and Buchan 1999; Chaudhuri and Gangadharan 2007; Snijders and Keren 2001; Buchan et al. 2008; Schwieren and Sutter 2008; Ben-Ner et al. 2004; Eckel and Grossman 1996).

  7. See Buchan et al. (2008), Ben-Ner et al. (2004), Cox and Deck (2006) and Eckel and Grossman (1996).

  8. Rabin (1993) was the first to consider the role of intentions, but he restricts his analysis to two player normal form games. Dufwenberg and Kirchsteiger (2004) and Falk and Fischbacher (2006) develops the theory for n player sequential games.

  9. If, on the other hand, the receiver is sensitive to inequality between other players, one could see treatment differences. But the direction of the treatment effects is not straight forward to predict, and would depend upon (among other things) the salary of the sender.

  10. Formally, Falk and Fischbacher (2006) defines the kindness term,φ j , as a product of outcomes and intentions, where both outcomes and intentions are functions of player j’s actions, the beliefs of player i about the strategy of player j as well as i’s belief about j’s belief about i’s strategy. See also Dufwenberg and Kirchsteiger (2004).

  11. See Charness and Rabin (2002)’s conceptual model of social preferences, where agent i’s utility is a weighted sum of his own material payoff and the material payoff of player j, and where the weight on player j’s payoff depends both on distributional and reciprocal preferences.

  12. Note that if the sender cares about his or her client, and the receiver knows this, then he may return money to the client in order to increase the utility of the sender. For the utility function of player i to account for this, one must replace the monetary payoff of player j with the utility of player j (at least in the reciprocity term). However, this will complicate the analysis.

  13. In our experiment, the clients were not even in the room, making them less entitled to money. This fact may also affect the kindness term,φ j .

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Correspondence to Ola Kvaløy.

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We would like to thank the Editor, two referees and Jim Andreoni, Alexander Cappelen, Gary Charness, Kristoffer Eriksen, Åshild Johnsen, Klaus Mohn, Mari Rege, Bettina Rochenbach and participants at the Nordic conference on Behavioral and Experimental Economics in Lund, the International Meeting on Experimental and Behavioral Economics in Castellón, the ESA Meeting in Xiamen and the ESA meeting in Tucson for helpful comments and discussions. Financial support from the Norwegian Research Council is greatly appreciated.

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Appendix: Instructions for the experiment. (DOCX 12 kB)

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Kvaløy, O., Luzuriaga, M. Playing the trust game with other people’s money. Exp Econ 17, 615–630 (2014). https://doi.org/10.1007/s10683-013-9386-4

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