Guilt aversion in (new) games: Does partners' payoff vulnerability matter?

Abstract

We investigate whether players' guilt aversion is modulated by their co-players vulnerability. In new variations of a three-player Trust game, we manipulate payoff-vulnerability and endowment-vulnerability. The former (standard) vulnerability arises when a player's material payoff depends on another player's action. The latter arises when a player's initial endowment is entrusted to another player. Treatments vary whether trustees can condition their decision on the belief of a co-player who is payoff-vulnerable and/or endowment-vulnerable, or not vulnerable at all, and the decision rights of the vulnerable player. We find that trustees' guilt aversion is insensitive to both the dimension of the co-player's vulnerability and the decision rights of the co-player. Guilt is activated even absent the vulnerability of their co-players. Rather, players' guilt is triggered by the willingness to respond to their co-player's beliefs on their strategy.