Competition Fosters Trust

TY - JOUR

T1 - Competition Fosters Trust

AU - Huck, Steffen

AU - Lünser, Gabriele

AU - Tyran, Jean-Robert Karl

N1 - JEL Classification: C72; C92; D40; L14

PY - 2012/9

Y1 - 2012/9

N2 - We study the effects of reputation and competition in a trust game. If trustees are anonymous, outcomes are poor: trustees are not trustworthy, and trustors do not trust. If trustees are identifiable and can, hence, build a reputation, efficiency quadruples but is still at only a third of the first best. Adding more information by granting trustors access to all trustees' complete history has, somewhat surprisingly, no effect. On the other hand, we find that competition, coupled with some minimal information, eliminates the trust problem almost completely

AB - We study the effects of reputation and competition in a trust game. If trustees are anonymous, outcomes are poor: trustees are not trustworthy, and trustors do not trust. If trustees are identifiable and can, hence, build a reputation, efficiency quadruples but is still at only a third of the first best. Adding more information by granting trustors access to all trustees' complete history has, somewhat surprisingly, no effect. On the other hand, we find that competition, coupled with some minimal information, eliminates the trust problem almost completely

KW - Faculty of Social Sciences

KW - Competition

KW - Reputation

KW - Trust; Moral hazard

KW - Information conditions

U2 - 10.1016/j.geb.2012.06.010

DO - 10.1016/j.geb.2012.06.010

M3 - Journal article

SN - 0899-8256

VL - 76

SP - 195

EP - 209

JO - Games and Economic Behavior

JF - Games and Economic Behavior

IS - 1

ER -