An experimental analysis of the effect of recordkeeping over direct reciprocity

Luis Paulo Guimarães Dos Santos,Anderson José Freitas De Cerqueira,César Valentim De Oliveira Carvalho Júnior

doi:10.1590/1808-057x202010800

Luis Paulo Guimarães Dos Santos, Anderson José Freitas De Cerqueira + Show 1 more

Open Access

https://doi.org/10.1590/1808-057x202010800

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Abstract

ABSTRACT This article experimentally investigates the impact of recordkeeping over the level of direct reciprocity. The study of reciprocity has been barely explored in accounting. This article helps to fill that gap by presenting the first investigation that provides experimental evidence of the causal relationship between recordkeeping and direct reciprocity. Reciprocity is a key aspect in the human cooperation process, based on its implications for the evolution of economic and social systems. However, understanding the mechanisms that promote it has been an important scientific challenge in various areas, such as biology, anthropology, sociology, psychology, and economics. The results of this study have an impact on accounting teaching as they provide a scientific basis that helps to improve the understanding of the role of accounting, through its most basic function, and its consequences for human cooperation. Moreover, they have implications for accounting research by showing the viability of using economic experiments to investigate emerging themes in accounting. Finally, from a practical viewpoint, the results of the research signal to the formulators of accounting control mechanisms the importance of considering the crowding out effect of those instruments over motivation. The research adopted a single-factor between-subjects experimental design with a pre-test and post-test and a control group. The causal inference was made using difference-in-differences regression models for panel data together with a variety of additional tests, aiming to give robustness to the results. The research presents evidence of the crowding out effect of recordkeeping over direct reciprocity in a trust game. This finding is important because it provides an explanation of how accounting, through its most basic function, influences human cooperation.

Highlights

Human cooperation is a prominent question in behavioral sciences, given that many collective problems are characterized by a conflict of interests (Gächter & Herrmann, 2009)
The main aim of the present research was to investigate the effect of recordkeeping on direct reciprocity, considering the hypothesis that, in accordance with the crowding out effect, its use will negatively affect reciprocal exchange relationships
That gain was 136.42 and 130.00 before and after the treatment, respectively. This suggests that the trustees acted strategically to increase their gains and punish the investors for breaching their trust. These results indicate the treatment effect, as the direct reciprocity decreased in the post-test, suggesting the crowding out effect of recordkeeping

Summary

Introduction

Human cooperation is a prominent question in behavioral sciences, given that many collective problems are characterized by a conflict of interests (Gächter & Herrmann, 2009). Reciprocity performs an important role, as it promotes trust and cooperation in social interactions, increasing the chances of a relationship of mutual trust developing (Malhotra, 2004). Basu et al (2009) were the first to study the role of formal recordkeeping in the evolution of cooperation, via its effect on reputation and reciprocity. The authors postulate that accounting, as an evolved economic institution, through its recordkeeping function, helps to promote the reciprocity needed for large scale exchanges and coordination in the interactions between strangers over time. Basu et al (2009) presented experimental evidence suggesting that in the trust game with repeated interactions, recordkeeping alters the economic narrative by promoting reputation building and, as a result, reciprocity. Their findings provide empirical support to the idea that institutions such as accounting can influence the propensity to act reciprocally and the cooperation between individuals. Basu et al (2009) argue that this result occurs because recordkeeping, by complementing the resources of the brain, improves the memory of past interactions, meaning that the decisions regarding future interactions are conditioned by the partners’ history of cooperation

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