Munich Personal RePEc Archive

Trust and risk revisited

Fairley, Kim and Sanfey, Alan and Vyrastekova, Jana and Weitzel, Utz (2014): Trust and risk revisited.

This is the latest version of this item.

[img]
Preview
PDF
MPRA_paper_59900.pdf

Download (522kB) | Preview

Abstract

A trustor faces a risky choice in the trust game when he acts upon his belief regarding the chances of betrayal by the trustee. Despite intensive research there is no clear evidence for a link between lottery risk preferences and risk involved in trusting others. We argue that this is due to crucial differences between the risk measurements in the two settings. Trusting is giving up control to a human while lottery risk arises from a mechanistic randomization device. We propose a risky trust game that experimentally measures risk in the same context as the standard trust game, but nevertheless reduces the trust decision to objective risk. Our results show that transfers in the trust game can indeed be explained by individual risk attitudes elicited with the risky trust game, while lottery risk preferences have no explanatory power.

Available Versions of this Item

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.