Contracting in the trust game

Bracht, Juergen (2010): Contracting in the trust game.

Abstract

We present a simple mechanism that can be implemented in a simple experiment. In a modified trust game, the allocator can offer to pay the investor to cooperate. The mechanism is successful at implementing efficient outcomes: participants manage to achieve an efficient outcome, when this is possible, two—thirds of the time. While these results are encouraging, we find evidence that both concerns for fairness and motivation crowding out distort the incentives presented in the mechanism.

• Item Type: MPRA Paper
• Language: English
• Keywords: compensation mechanism, side payment, trust game, signaling, crowding out, concerns, for equity, taste for cooperation
• Subjects: H - Public Economics > H4 - Publicly Provided Goods > H42 - Publicly Provided Private Goods; D - Microeconomics > D6 - Welfare Economics > D62 - Externalities; C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C92 - Laboratory, Group Behavior

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