Abstract
The purpose of this paper is analyzing whether trust and reciprocity are affected by how rich the partner is or how well the partner performed several tasks with real effort. A trust game (TG) experiment is designed with three treatments. First, a baseline Treatment B in which subjects play a finitely repeated TG. Second, in a Treatment H with history, subjects know the partner’s wealth level reached in the past. Third, in a Treatment E with effort the individual endowment with which the TG is played is endogenous and results from the subject’s performance in three different real effort tasks (maths, cognitive and general knowledge related). The data analysis highlights the importance of past wealth levels (Treatment H) as well as endowment heterogeneity (Treatment E), on the actual levels of trust and reciprocity. Specifically, it is observed that the decision of trustors is positively affected by positive past experienced reciprocity. Moreover, trustors are sensitive to how much money the trustee accumulates each round in Treatment H, trusting more the ones that have accumulated less compared to themselves. In contrast with that, it is remarkable in Treatment E that trustors are sensitive to the endowment level of the trustees, trusting more the partners that have got a higher than own endowment, probably considering that a person that performed better in the tasks is a better partner to trust. As far as second players’ behavior, as the amount received from the trustor increases it is less likely that the trustee reciprocates with higher than or with the egalitarian amount. In Treatments H and E, the probability that the trustee reciprocates with higher amount that the one received increases when inequality in endowment/accumulated earnings favors the trustor. Additional results come from analysis of personality archetypes and socio-demographic variables.
Highlights
The study of human behavior in terms of trust and reciprocity is crucial for understanding the social capital creation that allows achieving goals commonly shared by societies
To the best of our knowledge, our work is the first in designing a situation in which trust, reciprocity and altruism are analyzed taking into consideration those sources of economic heterogeneity: the own effort endogenous income inequality and the unequal accumulated earnings
Endogenous economic heterogeneity plays a role in trust and reciprocity behavior
Summary
The study of human behavior in terms of trust and reciprocity is crucial for understanding the social capital creation that allows achieving goals commonly shared by societies. People care about whether the money comes from own effort or just comes as manna from heaven, and this may affect the willingness to invest and the way of investing the money. This effect may be stronger in the case that the investment has uncertain returns, especially returns that depend on others’ decisions. This source of economic heterogeneity is considered endogenous
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