Competition fosters trust

Huck, Steffen; Lünser, Gabriele K.; Tyran, Jean‐Robert

doi:10.1016/j.geb.2012.06.010

Cited by 123 publications

(82 citation statements)

References 43 publications

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“…Charness and Dufwenberg (2006) and Ellingsen et al (2010) provide evidence of simple guilt in trust games while Charness and Dufwenberg (2011) test guilt-from-blame. 23 In repeated trust games that allow for reputation building, Huck et al (2012) find that competition among trustees significantly improves trust and trustworthiness and, hence, efficiency. In contrast, Fehr et al (1998) and Brandts and Charness (2004) find that competition does not significantly alter behavior in repeated gift-exchange games.…”

Section: Related Experiments and Behavioral Explanationsmentioning

confidence: 99%

Communication & competition

Goeree

Zhang

2013

Exp Econ

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Charness and Dufwenberg (Am. Econ. Rev. 101(4):1211-1237, 2011) have recently demonstrated that cheap-talk communication raises efficiency in bilateral contracting situations with adverse selection. We replicate their main finding and extend their design to include competition between agents. We find that communication and competition act as "substitutes:" communication raises efficiency in the absence of competition but not with competition, and competition raises efficiency without communication but lowers efficiency with communication. We briefly review some behavioral theories that have been proposed in this context and show that each can explain some but not all features of the observed data patterns. Our findings highlight the fragility of cheap-talk communication and may serve as a guide to refine existing behavioral theories. Abstract Charness and Dufwenberg (American Economic Review, June 2011, 1211-1237 have recently demonstrated that cheap-talk communication raises efficiency in bilateral contracting situations with adverse selection. We replicate their main finding and extend their design to include competition between agents. We find that communication and competition act as "substitutes:" communication raises efficiency in the absence of competition but not with competition, and competition raises efficiency without communication but lowers efficiency with communication. We briefly review some behavioral theories that have been proposed in this context and show that each can explain some but not all features of the observed data patterns. Our findings highlight the fragility of cheap-talk communication and may serve as a guide to refine existing behavioral theories.JEL Code: C92

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Section: Related Experiments and Behavioral Explanationsmentioning

confidence: 99%

Communication & competition

Goeree

Zhang

2013

Exp Econ

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“…We study competition in the guise of patients being able to freely choose among physicians. 4 This type of competition has been shown to be rather effective in markets for experience goods (Huck et al 2012). Competition has bite in such markets because reputational incentives are strong and can discipline sellers to provide good quality.…”

Section: Introductionmentioning

confidence: 99%

“…Huck et al (2012Huck et al ( , 2016 and Bolton et al (2008) study free choice of seller in a market for experience goods, Dulleck et al (2011) and Mimra et al (2013) in a market for credence goods (in their setting, competition is based both on reputation and prices). The main finding of these studies is that competition with fixed prices decreases opportunistic seller behavior whereas price competition pushes prices down but increases opportunism at the same time.…”

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confidence: 99%

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Medical Insurance and Free Choice of Physician Shape Patient Overtreatment: A Laboratory Experiment

et al. 2014

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In a laboratory experiment designed to capture key aspects of the interaction between physicians and patients, we study the effects of medical insurance and competition in the guise of free choice of physician, including observability of physicians' market shares. Medical treatment is an example of a credence good: only the physician knows the appropriate treatment, the patient does not. Even after a consultation, the patient is not sure whether he received the right treatment or whether he was perhaps overtreated. We find that with insurance, moral hazard looms on both sides of the market: patients consult more often and physicians overtreat more often than in the baseline condition. Competition decreases overtreatment compared to the baseline and patients therefore consult more often. When the two institutions are combined, competition is found to partially offset the adverse effects of insurance: most patients seek treatment, but overtreatment is moderated.

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“…Furthermore, the variances of social network structure will make information asymmetric more widespread in multi-nodes trust game than in dyad trust game [9] and may affect trust behaviour [10,11]. From this perspective, Bauernschuster et al [12] carried out a trust game with two trustors and one trustee, and artificially induced a partnership between the only trustee and one of the two trustors.…”

Section: Introductionmentioning

confidence: 99%

The Effect of Social Distance on Trust and Trustworthiness in Social Networks: An Experiment

Zhang¹,

Huang²,

Dong³

2017

dtssehs

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Abstract. We experimentally explore the effect of social distance on trust and trustworthiness by using three-node network trust game which contains one trustor and two trustees. When the relationship between strangers is considered as a long social distance, we employ real-life acquaintances to stand for short social distance. In the baseline treatment, all three members are completely strangers. While in the experimental treatment, one of the trustees is an acquaintance of the trustor and the other trustee is a stranger. The experimental results demonstrate that the varied social distances among trustor and trustees make some difference even when the identity information is semi-transparent that the trustor cannot tell with certainty which trustee is the acquaintance. The presence of the acquaintance promotes the trusting behaviour of the trustor towards both trustees. And the reactions of the two trustees are respectively higher than the trustees in the baseline treatment. Surprisingly, there is no significant difference of the return proportion between the stranger trustee and the acquaintance of the trustor owing to that both trustees in the multi periods trust game could compete for the chance to cooperate with the trustor in the future periods.

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Competition fosters trust

Cited by 123 publications

References 43 publications

Communication & competition

Communication & competition

Medical Insurance and Free Choice of Physician Shape Patient Overtreatment: A Laboratory Experiment

The Effect of Social Distance on Trust and Trustworthiness in Social Networks: An Experiment

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