Scandinavian Working Papers in Economics

UiS Working Papers in Economics and Finance,
University of Stavanger

No 2014/6: A trust game in loss domain.

Ola Kvaløy () and Miguel Luzuriaga ()
Additional contact information
Ola Kvaløy: UiS, Postal: University of Stavanger, NO-4036 Stavanger, Norway
Miguel Luzuriaga: UiS, Postal: University of Stavanger, NO-4036 Stavanger, Norway

Abstract: In standard trust games, no trust is the default, and trust generates a potential gain. We investigate a reframed trust game in which full trust is default and where no trust generates a loss. We find significantly lower levels of trust and trustworthiness in loss domain when full trust is default than in gain domain when no trust is default. As a consequence, trust is on average profitable in gain domain, but not in loss domain. We also find that subjects respond more positively to higher trust in loss domain than in gain domain.

Keywords: Trust; Reciprocity; Framing; Defaults; Reference Points; Experiment

JEL-codes: C72; C91

17 pages, June 10, 2014

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