Trust in triads: An experimental study

Abstract

Pairs of trustors play finitely repeated Trust Games with the same trustee in a laboratory experiment. We study trustfulness of the trustor and trustworthiness of the trustee. We distinguish between learning and control effects on behavior. Learning effects are related to the trustor's information on past behavior of the trustee. Control effects are related to the trustor's opportunities for sanctioning a trustee in future interactions. Hypotheses on learning and control effects are derived from backward-looking learning models and from forward-looking models of strategic behavior. The design of the experiment, with respect to trustfulness, allows for disentangling learning effects from a trustor's own experience with the trustee and learning effects through third-party information. Also, the design enables disentangling control effects on trustworthiness and trustfulness through a trustor's own sanction opportunities and opportunities for third-party sanctions. We find evidence for learning and control effects. The trustor's own experiences, the experiences of the other trustor, as well as the trustor's own sanction opportunities affect trustfulness. We find evidence for control effects on trustworthiness, including effects arising from opportunities for third-party sanctions. However, there is no evidence for control effects through opportunities for third-party sanctions on trustfulness. This could indicate limited strategic rationality of trustors.