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Contracting in the trust game

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

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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.

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