Abstract
Can a social norm of trust and reciprocity emerge among strangers? We investigate this question by examining behavior in an experiment where subjects repeatedly play a two-player binary “trust” game. Players are randomly and anonymously paired with one another in each period. The main questions addressed are whether a social norm of trust and reciprocity emerges under the most extreme information restriction (anonymous community-wide enforcement) or whether trust and reciprocity require additional, individual-specific information about a player’s past history of play and whether that information must be provided freely or at some cost. In the absence of such reputational information, we find that a social norm of trust and reciprocity is difficult to sustain. The provision of reputational information on past individual decisions significantly increases trust and reciprocity, with longer histories yielding the best outcomes. Importantly, we find that making reputational information available at a small cost may also lead to a significant improvement in trust and reciprocity, despite the fact that most subjects do not choose to purchase this information.
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For helpful comments and suggestions we wish to thank the Editor, an anonymous referee, Andreas Blume, Giovanna Devetag, Guillaume Frechette, Soiliou Namoro, Lise Vesterlund, Roberto Weber, as well as seminar participants at Carnegie-Mellon University, Iowa State University, Fudan University, Shanghai Jiao Tong University, the University of Copenhagen, the 2009 CEA annual meeting and the 2009 DIME Workshop on Market and Firm Dynamics.
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Duffy, J., Xie, H. & Lee, YJ. Social norms, information, and trust among strangers: theory and evidence. Econ Theory 52, 669–708 (2013). https://doi.org/10.1007/s00199-011-0659-x
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DOI: https://doi.org/10.1007/s00199-011-0659-x
Keywords
- Social norms
- Trust game
- Random matching
- Trust and reciprocity
- Information
- Reputational mechanisms
- Experimental economics