Building and Rebuilding Trust with Promises and Apologies

Schniter, Eric and Sheremeta, Roman and Sznycer, Daniel (2013): Building and Rebuilding Trust with Promises and Apologies. Published in: Journal of Economic Behavior and Organization (2013)

Abstract

Using trust games, we study how promises and messages are used to build new trust where it did not previously exist and to rebuild damaged trust. In these games, trustees made non-binding promises of investment-contingent returns, then investors decided whether to invest, and finally trustees decided how much to return. After an unexpected second game was announced, but before it commenced, trustees could send a one-way message. This design allowed us to observe the endogenous emergence and natural distribution of trust-relevant behaviors and focus on naturally occurring remedial strategies used by promise-breakers and distrusted trustees, their effects on investors, and subsequent outcomes. In the first game 16.6% of trustees were distrusted and 18.8% of trusted trustees broke promises. Trustees distrusted in the first game used long messages and promises closer to equal splits to encourage trust in the second game. To restore damaged trust, promise-breakers used apologies and upgraded promises. On average, investments in each game paid off for investors and trustees, suggesting that effective use of cheap signals fosters profitable trust-based exchange in these economies.

• Item Type: MPRA Paper
• Language: English
• Keywords: promise, atonement, apology, cheap talk, cheap signals, trust game, trust building, remedial strategies, reciprocity, experiments
• Subjects: C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games; C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C91 - Laboratory, Individual Behavior

References

Axelrod, R, & Dion, D. (1988). The further evolution of cooperation. Science 242:1385-1389

Balliet, D. (2010). Communication and cooperation in social dilemmas: a meta-analytic review. Journal of Conflict Resolution 54(1): 39-57

Barnett, M. (2003). Unringing the Bell: Can Industries Reverse Unfavorable Institutional Shifts Triggered by Their Own Mistakes? Southern Management Association Conference Proceedings pp.800-806

Benoit, W.L., & Drew, S. (1997). Appropriateness and effectiveness of image repair strategies. Communication Reports, 10:153–163.

Berg, J., Dickhaut, J., & McCabe, K. (1995). Trust, reciprocity and social history. Games and Economic Behavior 10:122-142

Bohnet, I. & Frey, B.S. (1999). The sound of silence in prisoner’s dilemma and dictator games. Journal of Economic Behavior & Organization 38:43-57.

Bottom, W., Daniels, S., Gibson, K.S., & Murnighan, J.K. (2002). When talk is not cheap: Substantive penance and expressions of intent in the reestablishment of cooperation. Organization Science, 13: 497-515.

Bracht, J. & Feltovich, N. (2009). Whatever you say, your reputation precedes you: observation and cheap talk in the trust game. Journal of Public Economics 93:1036-1044.

Buchan, N.R., Croson, R. & Johnson, E.J. (2006). Let’s Get Personal: An International Examination of the Influence of Communication, Culture, and Social Distance on Other Regarding Preferences. Journal of Economic Behavior and Organization, 60(3):373-398.

Carter, J.R. & Irons, M.D. (1991). Are economists different, and if so, why? Journal of Economic Perspectives 5:171-177.

Charness, G. & Dufwenberg, M. (2006). Promises and Partnership. Econometrica 74:1579-1601.

Cohen, J. (1960). A Coefficient of Agreement for Nominal Scales. Educational and Psychological Measurement, 20: 37-46.

Conway, N., & Briner, R. B. (2002). A daily diary study of affective responses to psychological contract breach and exceeded promises. Journal of Organizational Behavior, 23: 287–302.

Dawkins, R. & Krebs, J. R. (1978). Animal signals: information or manipulation. In: Behavioural Ecology: an Evolutionary Approach. 1st edition (Ed. by J. R. Krebs & N. B. Davies), pp. 282–309. Oxford: Blackwell Scientific.

De Cremer, D. (2010). Rebuilding trust. Business Strategy Review, 21(2), 79-80.

De Cremer, D., van Dijk, E., & Pillutla, M.M. (2010). Explaining unfair offers in ultimatum games and their effects on trust: an experimental approach. Business Ethics Quarterly 20(1):107-126.

Delton, A. W, Krasnow, M. M., Cosmides, L. & Tooby, J. (2011). Evolution of direct reciprocity under uncertainty can explain human generosity in one-shot encounters. Proceedings of the National Academy of Sciences of the United States of America, 108, 13335-13340.

Deutsch, M. (1958). Trust and suspicion. Journal of Conflict Resolution 2:256-79.

Deutsch, M. (1960). The effect of motivational orientation upon trust and suspicion. Human Relations 13:123-3

Diggle, S.P., Gardner, A., West, S.A. & Griffin, A.S. (2007). Evolutionary theory of bacterial quorum sensing: when is a signal not a signal? Philosophical Transactions of the Royal Society B 362:1241–1249.

Dirks, K. T., Lewicki, R. J., & Zaheer, A. (2009). Repairing relationships within and between organizations: Building a conceptual foundation. Academy of Management Review, 34(1), 68–84.

Duffy, J. & Feltovich, N. (2006). Words, deeds, and lies: strategic behavior in games with multiple signals. Review of Economic Studies 73:669-688.

Elingsen, T., & Johannesson, M. (2004). Promises, threats, and fairness. Economic Journal 114:397-420.

Elsbach, K. D. (1994). Managing organizational legitimacy in the California cattle industry: The construction and effectiveness of verbal accounts. Administrative Science Quarterly, 39: 57–88.

Farrell, J. & Rabin, M. (1996). Cheap Talk. Journal of Economic Perspectives 10 (3): 103–118.

Fischbacher, U. & Utikal, V. (2010). On the acceptance of apologies. Research Paper Series Thurgau Institute of Economics and Department of Economics No. 53.

Gibson, K., Bottom, W., & Murnighan, K. (1999) Once bitten: Defection and reconciliation in a cooperative enterprise. Business Ethics Quarterly, 9: 69-85.

Gillespie, N., & Dietz, G. (2009). Trust repair after an organization-level failure. Academy of Management Review, 34: 127–145.

Girard, M., & Mullet, E. (1997). Propensity to forgive in adolescents, young adults, older adults, and elderly people. Journal of Adult Development, 4, 209–220.

Girard, M., Mullet, E., & Callahan, S. (2002). The mathematics of forgiveness. American Journal of Psychology, 115, 351–375.

Grafen, A. (1990). Biological signals as handicaps. Journal of Theoretical Biology, 144:517–546.

Guth, W.R., Schmittberger, W.R., Schwartze, B. (1982). An experimental analysis of Ultimatum Games. Journal of Economic Behavior and Organization. 3:367-388.

Guth, W.R. & Tietz, P. (1986). Acutioning ultimatum bargaining positions: how to act if rational decisions are unacceptable. In R.W. Scholz (Ed.) Current Issues in West German Decision Research (pp. 173-185). Frankfurt: P. Lang.

Haselton, M.G. & Nettle, D. (2006). The paranoid optimist: An integrative evolutionary model of cognitive biases. Personality & Social Psychology Review 10(1):47-66

Hirshleifer, J. (1984). On the emotions as guarantors of threats and promises. UCLA Department of Economic Working Paper #337 (August).

Hoffman, E., McCabe, K., & Smith, V. L. (1996). Social distance and other-regarding behavior in dictator games. American Economic Review, 86(3), 653-660.

Houser, D. & Xiao, E. (2011). Classification of natural language messages using a coordination game. Experimental Economics 14:1-14

Johnson, N.D. & Mislin, A.A. (2011). Trust games: a meta-analysis. Journal of Economic Pscyhology 32:865-889

Kelly, R. L. (1995). The foraging spectrum. Washington, D.C.: Smithsonian Institution Press.

Kerr, N. & Kaufman-Gilliland, C. (1994). Communication, commitment, and cooperation in social dilemmas. Journal of Personality and Social Psychology 66:513-529.

Kim, P. H., Ferrin, D. L., Cooper, C. D., & Dirks, K. T. (2004). Removing the shadow of suspicion: The effects of apology vs. denial for repairing ability- vs. integrity-based trust violations. Journal of Applied Psychology, 89: 104-118.

Kim, P. H., Dirks, K. T., Cooper, C. D., & Ferrin, D. L. (2006).When more blame is better than less: The implications of internal vs. external attributions for the repair of trust after a competence- vs. integrity-based trust violation. Organizational Behavior and Human Decision Processes, 99: 49–65.

Kiyonari, T., Tanida, S., & Yamagishi, T. (2000). Social exchange and reciprocity: confusion or a heuristic? Evolution and human behavior, 21(6), 411-427.

Knight, R.F. & Pretty, D.J. (1999). Corporate catastrophes, stock returns, and trading volume. Corporate Reputation Review, 2(4):363-378

Krippendorff, K. (2004). Content Analysis: An Introduction to Its Methodology. Sage Publications: Thousand Oaks, CA.

Lachmann, M., Számadó, S., & Bergstrom, C. T. (2001). Cost and conflict in animal signals and human language. Proceedings of the National Academy of Sciences, 98(23), 13189–13194.

Landis, J.R. & Koch, G. (1977). An Application of Hierarchical Kappa-Type Statistics in the Assessment of Majority Agreeement among Multiple Observers. Biometrics, 33. 363-374.

Lazare, A. (2004). On Apology. New York: Oxford University Press

Lewicki, R.J. & Wiethoff, C. (2000). Trust, trust development, and trust repair. In M. Deutsch & P. T. Coleman (Eds.), Handbook of conflict resolution: Theory and practice. San Francisco, CA: Jossey-Bass.

Lewicki, R.J., & Bunker, B.B. (1996). Developing and maintaining trust in working relationships. In R. M. Kramer & T. R. Tyler (Eds.), Trust in organizations: Frontiers of theory and research. Thousand Oaks, CA: Sage.

Masclet, D., Noussair, C., Tucker, S., & Villeval, M. (2003). Monetary and non-monetary punishment in the voluntary contributions mechanism. The American Economic Review 93(1):366-380.

Maynard-Smith, J. (1982). Do animals convey information about their intentions? Journal of Theoretical Biology, 97:1–5.

McCullough, M.E., Rachal, K.C., Sandage, S.J., Worthington, E.L., Brown, S.W., & Hight, T.L. (1998). Interpersonal forgiving in close relationships. II: Theoretical elaboration and measurement. Journal of Personality and Social Psychology, 75, 1586–1603.

McCullough, M.E., Worthington, E.L., Jr., & Rachal, K.C. (1997). Interpersonal forgiving in close relationships. Journal of Personality and Social Psychology, 73, 321–336.

Mishra, A. K. (1996). Organizational responses to crisis: The centrality of trust. In R. M. Kramer & T. R. Tyler (Eds.), Trust in organizations: Frontiers of theory and research: 261– 287. Thousand Oaks, CA: Sage

Nakayachi, K., & Watabe, M. (2005). Restoring trustworthiness after adverse events: The signaling effects of voluntary “hostage posting” on trust. Organizational Behavior and Human Decision Processes, 97: 1–17.

Ohbuchi, K., Kameda, M., & Agarie, N. (1989). Apology as aggression control: Its role in mediating appraisal of and response to harm. Journal of Personality and Social Psychology, 56: 219-227.

Ohtsubo, Y., & Watanabe, E. (2009). Do sincere apologies need to be costly? Test of a costly signaling model of apology. Evolution and Human Behavior, 30(2), 114-123.

Orbell, J., Dawes, R., & Kragt, A. van de (1988). Explaining discussion induced cooperation. Journal of Personality and Social Psychology, 54: 811-819.

Ostrom, E. & Walker, J. (2005). Trust and reciprocity: Interdisciplinary lessons from experimental research. Russell Sage Foundation Publications.

Petrie, M., Halliday, T., & Sanders, C. (1991). Peahens prefer peacocks with elaborate trains. Animal Behavior 41(2):323-331.

Prasnikar, V. & Roth, E. (1992). Considerations of fairness and strategy: experimental data from sequential games. Quarterly Journal of Economics 106: 865-888.

Radlow, R. & Weidner, M.F. (1966). Unenforced commitments in “cooperative” and “noncooperative” non-constant-sum games. Journal of Conflict Resolution 10:497-50

Ren, H., & Gray, B. (2009). Repairing relationship conflict: How violation types and culture influence the effectiveness of restoration rituals. Academy of Management Review, 34: 105–126

Ridings, C.M., Gefen, D., & Arinze, B. (2002). Some antecedents and effects of trust in virtual communities. Journal of Strategic Information Systems 11 (3), 271–295.

Robinson, S. L., & Rousseau, D. M. (1994). Violating the psychological contract: Not the exception but the norm. Journal of Organizational Behavior, 15: 245-259.

Rohwer, S. (1977). Status Signaling in Harris Sparrows: Some Experiments in Deception. Behaviour, 61(1/2), 107-129.

Rousseau, D.M. (1989). Psychological and implied contracts in organizations. Employee Responsibilities and Rights Journal, 2(2):121-139.

Rubin, J. & Brown, B. (1975). The Social Psychology of Bargaining and Negotiation. New York, NY: Academic Press.

Sally, D. (1995). Conversation and cooperation in social dilemmas. Rationality and Society 7(1), 58-92

Scher, S.J., & Darley, J.M. (1997). How effective are the things people say to apologize? Effects of the realization of the apology speech act. Journal of Psycholinguistic Research, 26: 127–40.

Schlenker, B.R. (1980). Impression management: The self-concept, social identity, and interpersonal relations. Monterey, CA: Brooks/Cole Publishing Company.

Schweitzer, M.E., Hershey, J., & Bradlow, E. (2006). Promises and lies: Restoring violated trust. Organizational Behavior and Human Decision Processes, 101: 1–19.

Scott-Phillips, T.C. (2008). Defining biological communication. Journal of Evolutionary Biology, 21:387-395

Sinaceur, M., & Tiedens, L. Z. (2006). Get mad and get more than even: When and why anger expression is effective in negotiations. Journal of Experimental Social Psychology, 42, 314 –322.

Slovic, P. (1993). Perceived risk, trust, and democracy. Risk Analysis, 13:675-682

Stouten, J., & De Cremer, D. (2010). “Seeing is believing”: The effects of facial expressions of emotion and verbal communication in social dilemmas. Journal of Behavioral Decision Making 23:271-287

Tavuchis, N. (1991). Mea culpa: A sociology of apology and reconciliation. Stanford, CA: Stanford University Press.

Tomlinson, E. C., Dineen, B. R., & Lewicki, R. J. (2004). The road to reconciliation: Antecedents of victim willingness to reconcile following a broken promise. Journal of Management, 30: 165–187.

Van Kleef, G.A., De Dreu, C.K.W., & Manstead, A.S.R. (2004). The interpersonal effects of anger and happiness in negotiations. Journal of Personality and Social Psychology, 86, 57–76.

Van Kleef, G.A., De Dreu, C.K.W., & Manstead, A.S.R. (2006). Supplication and appeasement in conflict and negotiation: The interpersonal effects of disappointment, worry, guilt and regret. Journal of Personality and Social Psychology, 91, 124–142.

Witvliet, C.V.O., Ludwig, T.E., & Bauer, D.J. (2002). Please forgive me: Transgressors’ emotions and physiology during imagery of seeking forgiveness and victim responses. Journal of Psychology and Christianity, 21, 219–233.

Wubben, M.J.J., De Cremer, D., & van Dijk, E. (2009). When and how communicated guilt affects contributions in public good dilemmas. Journal of Experimental Social Psychology 45:15-23.

Zahavi, A. (1975). Mate selection: a selection for a handicap. Journal of Theoretical Biology, 53:205–214.

Zahavi, A. (1993). The fallacy of conventional signalling. Philosophical Transactions of the Royal Society London, Series B, 340:227–230.

Zheng, J., Veinott, E., Bos, N., Olson, J.S., & Olson, G.M. (2002). Trust without touch: jumpstarting long-distance trust with initial social activities. In Proceedings of CHI. ACM Press, New York, NY, pp. 141–146.