Building and rebuilding trust with promises and apologies☆
Highlights
► Promises and messages are used to build new trust and rebuild damaged trust. ► Promise-breakers use apologies and upgraded promises to restore damaged trust. ► Distrusted trustees use long messages and equal-split promises to encourage trust. ► Effective use of cheap signals fosters profitable exchange.
Introduction
In modern economies, where trust realizes vast amounts of potential gains in transactions involving deferred or risky returns, problems associated with developing and restoring trust are particularly relevant. A scientific understanding of the processes that encourage trust where it did not previously exist and restore trust when it is damaged is therefore of paramount importance. Despite the large literature on damages to corporate reputation (e.g. see Barnett, 2003 on US chemical industry disasters; see Robinson and Rousseau, 1994 for a survey of corporate trust violations), very little research exists on how new trust can be encouraged where it did not previously exist and how damaged trust can be rebuilt (Dirks et al., 2009). Most of the existing research in this area (but see Fischbacher and Utikal, 2010) is either exclusively theoretical (Lewicki and Bunker, 1996, Mishra, 1996, Lewicki and Wiethoff, 2000, Ren and Gray, 2009, Gillespie and Dietz, 2009), based on anecdotal or archival evidence (Elsbach, 1994, Knight and Pretty, 1999), surveys (Slovic, 1993), diary studies (Conway and Briner, 2002), fictional vignettes (Tomlinson et al., 2004), videotaped dramatizations (Kim et al., 2004, Kim et al., 2006), or experimental designs using deception (Gibson et al., 1999, Bottom et al., 2002, Nakayachi and Watabe, 2005, Schweitzer et al., 2006, Ohtsubo and Watanabe, 2009).
To study how damaged trust can be rebuilt and new trust can be encouraged, we conducted a non-deceptive study wherein financially motivated participants used endogenously created and naturally distributed promises and apologies. Our study is based on a version of the “investment game” by Berg et al. (1995). In the original investment game an investor is endowed with $10 and can invest any portion of her endowment by sending it to a trustee. The amount sent triples in value before reaching the trustee. Having received funds from this tripled investment, the trustee can reciprocate by returning any portion of these funds to the investor. Since sending money is risky, investments are usually interpreted as trust, and since returning money is costly, reciprocation via returns on investments is interpreted as evidence of trustworthiness.1 The investment game, therefore, has been extensively used to study trust and reciprocity in an investment setting (for a review see Ostrom and Walker, 2005). A common finding in the literature is that investors tend to exhibit trust and trustees tend to reciprocate. It has also been well established that pre-play communication, even if “irrelevant” to game strategy, can induce higher contributions in public goods games (for meta-analyses see Sally, 1995, Balliet, 2010) and more cooperation in dyadic social dilemmas (Deutsch, 1958, Deutsch, 1960, Radlow and Weidner, 1966, Buchan et al., 2006, Duffy and Feltovich, 2006, Bracht and Feltovich, 2009). However, with the exception of a few studies using deception, the experimental economic literature is silent as to what behavior ensues when promises fail to establish trust and what happens to trust and reciprocity in subsequent interactions after promises are broken and trust is damaged.
In this paper we describe a study using trust games that examines how promises and messages are used to build new trust where it did not previously exist and to rebuild damaged trust. In these games, trustees made non-binding promises of investment-contingent returns, then investors decided whether to invest, and finally trustees decided how much to return. After an unexpected second game was announced, but before it commenced, trustees could send a one-way message. This design allowed us to observe the endogenous emergence and natural distribution of trust-relevant behaviors and focus on naturally occurring remedial strategies used by promise-breakers and distrusted trustees, their effects on investors, and subsequent outcomes. In the first game 16.6% of trustees were distrusted and 18.8% of trusted trustees broke promises. Trustees distrusted in the first game used promises closer to equal splits and – compared to previously trusted promise-keepers – relatively longer messages to encourage new trust in the second game. Promise-breakers used relatively higher new promises (compared to all other trustees) and messages (usually with apology) to successfully restore damaged trust. On average, investments in each game paid off for investors and trustees, suggesting that the context-specific signaling described above, can foster profitable trust-based exchanges in these economies.
Section snippets
Background
While mutually beneficial non-binding agreements help realize opportunities to gain from asynchronous trade, they are subject to exploitation by under-reciprocators or non-reciprocators. Our research focuses on trustees’ cue and signal effects on investor trust in asynchronous exchanges that provide opportunity for mutual advantage. In these exchanges, we define trust as voluntarily ceding resources to another in the expectation that the other intends to reciprocate in accordance with signaled
Experimental design and procedures
The experiment was conducted at Chapman University's ESI laboratory. 458 participants (229 pairs) were recruited from a standard campus-wide subject pool for participation in an experiment that could last up to 45 min. Participants interacted with each other anonymously over a local computer network. The experiment, which lasted an average of 35 min total and did not involve deception, proceeded as follows. Upon arrival, participants in the experiment were told that they would receive $7 for
Game 1
We expect that trustees, aware of investor self-interest and motives for critical signal reception, would promise investors transfers of at least $6 (minimally higher than the payoff to the investor if he chooses OUT) but less than $20 (which would provide no benefit to the promise-maker). Two plausible focal points for promised return amounts are the midpoint of the $6–$19 range, $12.5 (though only whole dollar amounts like $12 or $13 could be chosen), and the even-split of $10. Wary that
Discussions and conclusions
Opportunities for mutual gains often exist where previous exchange histories have not yet been developed or where trust has been damaged by expectations not met. While promises and apologies appear to be important tools for building and rebuilding trust in these problematic situations, most of the research on these remedial strategies is based on self-report, anecdotal, or archival evidence, or else experiments based on fictional vignettes, videotaped dramatization, or deception. By using a
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For inspiration to pursue this study we thank John Dickhaut. We thank an advisory editor and an anonymous referee for their comments. Helpful comments were also received from Hilly Kaplan, Wojtek Przepiorka, and participants at the Workshop on Communication in Games (at the University of Zurich), the Human Behavior and Evolution Society annual meeting (in Montpellier, France), the Center for Evolutionary Psychology (at UC Santa Barbara), the John Dickhaut Memorial Conference (at Chapman University), and the Association for Religion, Economics and Culture annual meeting (at Chapman University). We would also like to thank the Economic Science Institute at Chapman University for funding this research.