Econ Dept Seminars

University of Canterbury Course , Winter 2009 , Prof. John Fountain

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Overview

Seminars and public lectures presented in the Economics Department,School of Business and Eonomics.

Lecture 3: Strategic Uses of Trust

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        Lecture Details

        Maros presents an interesting - and very interactive! - seminar on his research on trust games. Here is the abstract While most of the previous literature interprets trust as an action, we adopt a view that trust is represented by a belief that the other party will return a fair share. The agents action is then a commitment device that signals this belief. In this paper we propose and test a conjecture that economic agents use trust strategically. That is, the agents have incentives to inflate the perceived level of trust (the signal) in order to induce a more favorable outcome for themselves. In the experiment we study the behavior of subjects in a modified investment game which is played sequentially and simultaneously. While the sequential treatment allows for strategic use of trust, in the simultaneous treatment the first movers action is not observed and hence does not signal her belief. In line with our prediction we find that first movers send significantly more in the sequential treatment than in simultaneous. Moreover, second movers reward trusting action, but only if it is maximal. We also find that signaling with trust enhances welfare. Original mp4s of this video and other resources related to the presentationseminar (eg pdf of the paper) can be obtained at httpuctv.canterbury.ac.nzmodulesjournaljournal.php?space_key=1&module_key=70

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