Whatever you say, your reputation precedes you: Observation and cheap talk in the trust game

Juergen Bracht, Nicholas Feltovich

Research output: Contribution to journalArticleResearchpeer-review

51 Citations (Scopus)

Abstract

Behavior in trust games has been linked to general notions of trust and trustworthiness, important components of social capital. In the equilibrium of a trust game, the investor does not invest, foreseeing that the allocator would keep all of the returns. We use a human-subjects experiment to test the effects of changes to the game designed to increase cooperation and efficiency. We add a pre-play stage in which the investor receives a cheap-talk message from the allocator, observes the allocator s previous decision, or both. None of these changes alter the game s theoretical predictions. We find that allowing observation results in substantially higher cooperation and efficiency, but cheap talk has little effect.
Original languageEnglish
Pages (from-to)1036 - 1044
Number of pages9
JournalJournal of Public Economics
Volume93
Issue number9-10
DOIs
Publication statusPublished - 2009
Externally publishedYes

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