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Distinguishing trust from risk: an anatomy of the investment game


Houser, D; Schunk, D; Winter, J (2010). Distinguishing trust from risk: an anatomy of the investment game. Journal of Economic Behavior & Organization, 74(1-2):72-81.

Abstract

The role of trust in promoting economic activity and societal development has received considerable academic attention by social scientists. A popular way to measure trust at the individual level is the so-called “investment game” (Berg, Dickhaut, and McCabe, 1995). It has been widely noted, however, that risk attitudes can also affect decisions in this game, and thus in principle confound inferences about trust. We provide novel evidence, shedding light on the role of risk attitudes for trusting decisions. To the best of our knowledge, our data are the first rigorous evidence that (i) aggregate investment distributions differ significantly between trust and risk environments, and (ii) risk attitudes predict individual investment decisions in risk games but not in the corresponding trust games. Our results are convergent evidence that trust decisions are not tightly connected to a person’s risk attitudes, and they lend support to the “trust” interpretation of decisions in investment games.

Abstract

The role of trust in promoting economic activity and societal development has received considerable academic attention by social scientists. A popular way to measure trust at the individual level is the so-called “investment game” (Berg, Dickhaut, and McCabe, 1995). It has been widely noted, however, that risk attitudes can also affect decisions in this game, and thus in principle confound inferences about trust. We provide novel evidence, shedding light on the role of risk attitudes for trusting decisions. To the best of our knowledge, our data are the first rigorous evidence that (i) aggregate investment distributions differ significantly between trust and risk environments, and (ii) risk attitudes predict individual investment decisions in risk games but not in the corresponding trust games. Our results are convergent evidence that trust decisions are not tightly connected to a person’s risk attitudes, and they lend support to the “trust” interpretation of decisions in investment games.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Language:English
Date:2010
Deposited On:25 Jan 2011 11:15
Last Modified:05 Apr 2016 14:38
Publisher:Elsevier
ISSN:0167-2681
Publisher DOI:https://doi.org/10.1016/j.jebo.2010.01.002

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