Experimental Economics

, Volume 15, Issue 4, pp 571–588 | Cite as

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

Article

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

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Copyright information

© Economic Science Association 2012

Authors and Affiliations

  1. 1.Virginia Tech Carilion Research InstituteVirginia Polytechnic Institute and State UniversityRoanokeUSA
  2. 2.Interdisciplinary Center for Economic ScienceGeorge Mason UniversityArlingtonUSA

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