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Sorting with shame in the laboratory

Ong, David (2008): Sorting with shame in the laboratory.

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Trust is indispensable to fiduciary fields (e.g., credit rating), where experts exercise wide discretion on others behalf. Can the shame from scandal sort trustworthy people out of a fiduciary field? I tested for the possibility in a charitable contribution game where subjects could be "ungenerous" when unobserved. After establishing that "generosity" required a contribution of more than $6, subjects were given the choice of contributing either $5 publicly or $0-$10 privately. Almost all control subjects chose to contribute privately less than $2. The majority of treatment subjects, after being told the prediction that they were unlikely to contribute more than $2, if they contributed privately, contributed $5 publicly. This suggests that the mere belief that a subject would exploit the greater discretion and unobservability of a fiduciary-like position can deter entry into such a position. Thus, scandals that create such a belief could repel shame-sensitive people from that field -- possibly to the detriment of the field and the economy as a whole. The shame externality of a scandals on private judgments may also been seen in politically correct speech after demonstrated racial prejudice of others.

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