Cooperation based on trust. An experimental investigation

Abstract

We consider the most basic sequential game, called the ‘game of trust’, in which the first mover starts by deciding between cooperation and non-cooperation, whereas the second mover can only react in case of cooperation by either exploiting the other player or by dividing the rewards equally. The unique subgame perfect equilibrium predicts non-cooperation although this is payoff-dominated by fair cooperation. We analyze experiments by which we want to assess whether there is trust in the other player's fairness, and, if so, whether it enables mutually beneficial cooperation. When positions were auctioned, there was no trust. When positions were allocated randomly, the considerably often occurring trust was rarely rewarded.