Strategic Trustworthiness via Unstrategic Third-Party Reward An Experiment

Abstract

The paper investigates the introduction of an institution, in form of an impartial authority (third party), into a two-person situation. The impartial authority can reward a stranger for acting according to a desired behavioral norm. The reward is costly for the authority and her behavior cannot be strategic, i.e., it cannot lead to higher earnings for her in a later stage. A trust game followed by a helping game is implemented. The trustee in the trust game becomes the recipient in the helping game. This paper demonstrates that positive strong indirect reciprocity can exist in one-shot settings (helpers transfer more money to their recipients the more these are trustworthy) and that positive strong indirect reciprocity is not diminishing if the reward can be anticipated. Furthermore, the positive strong indirect reciprocity is correctly anticipated and leads to higher trustworthiness in the treatment.