Building and rebuilding trust with promises and apologies

15 Pages·2013·0.89 MB·English

by  Eric Schniter

JournalofEconomicBehavior&Organization94 (2013) 242–256

ContentslistsavailableatScienceDirect

Journal of Economic Behavior & Organization

journal homepage: www.elsevier.com/locate/jebo

(cid:2)
Building and rebuilding trust with promises and apologies

EricSchnitera,∗,RomanM.Sheremetab,DanielSznycerc

aEconomicScienceInstitute,ChapmanUniversity,OneUniversityDrive,Orange,CA92866,UnitedStates
bArgyrosSc hoolof Businessa ndEcono mics,Chapm an University, OneU niversity Dr ive,Ora nge,CA 92866,UnitedStates
cCenterfo rEvolu ti onaryPsy chol ogy,Univer sityofCali fornia,Sant aBa rbara,CA9 3106, UnitedS tate s

a r t i c l e i n f o a b s t r a c t

Articlehistory: Usingtrustgames,westudyhowpromisesandmessagesareusedtobuildnewtrustwhere
Receiv ed14May2012 itdidn otpr eviousl yex istan dtor ebuilddam ag edtrust.In the sega m es,tru stees mad enon-
Accepted 8 S epte mber 2012 bi ndi ngp romiseso finve stm en t-contin gentretu rns,t he ninve storsd ecidedw heth erto
Available online 14 September 2012
invest,andfinallytrusteesdecidedhowmuchtoreturn.Afteranunexpectedsecondgame

wasannounced,butbeforeitcommenced,trusteescouldsendaone-waymessage.This
Keywords:
designallowedustoobservetheendogenousemergenceandnaturaldistributionoftrust-
Promise
relevantbehaviorsandfocusonnaturallyoccurringremedialstrategiesusedbypromise-
Atonement
Apology breakersanddistrustedtrustees,theireffectsoninvestors,andsubsequentoutcomes.Inthe

Cheaptalk firstgame16.6%oftrusteesweredistrustedand18.8%oftrustedtrusteesbrokepromises.

Cheapsignals Trusteesdistrustedinthefirstgameusedlongmessagesandpromisesclosertoequal

Trustgame splitstoencouragetrustinthesecondgame.Torestoredamagedtrust,promise-breakers
Trust building used apo logiesand upgr ad edp romise s.On ave rage,in vestment sinea chgamepaidoff
Reme dial strategies forin vestorsan dtru stees,sug gestingtha tef fectiveus eofcheapsi gna lsfos tersp rofita ble
Reciprocity
trust-basedexchangeintheseeconomies.
Experiments
© 2012 Elsevier B.V. All rights reserved.
1. Introduction

Inmoderneconomies,wheretrustrealizesvastamountsofpotentialgainsintransactionsinvolvingdeferredorrisky

returns,problemsassociatedwithdevelopingandrestoringtrustareparticularlyrelevant.Ascientificunderstandingof

the processes that encourage trust where it did not previously exist and restore trust when it is damaged is therefore

ofparamountimportance.Despitethelargeliteratureondamagestocorporatereputation(e.g.seeBarnett,2003onUS

chemicalindustrydisasters;seeRobinsonandRousseau,1994forasurveyofcorporatetrustviolations),verylittleresearch

existsonhownewtrustcanbeencouragedwhereitdidnotpreviouslyexistandhowdamagedtrustcanberebuilt(Dirks

etal.,2009).Mostoftheexistingresearchinthisarea(butseeFischbacherandUtikal,2010)iseitherexclusivelytheoretical

(Lewicki and Bunker, 1996; Mishra, 1996; Lewicki and Wiethoff, 2000; Ren and Gray, 2009; Gillespie and Dietz, 2009),

based on anecdotal or archival evidence (Elsbach, 1994; Knight and Pretty, 1999), surveys (Slovic, 1993), diary studies

(ConwayandBriner,2002),fictionalvignettes(Tomlinsonetal.,2004),videotapeddramatizations(Kimetal.,2004,2006),

(cid:2)
ForinspirationtopursuethisstudywethankJohnDickhaut.Wethankanadvisoryeditorandananonymousrefereefortheircomments.Helpful

commentswerealsoreceivedfromHillyKaplan,WojtekPrzepiorka,andparticipantsattheWorkshoponCommunicationinGames(attheUniversityof

Zurich),theHumanBehaviorandEvolutionSocietyannualmeeting(inMontpellier,France),theCenterforEvolutionaryPsychology(atUCSantaBarbara),

theJohnDickhautMemorialConference(atChapmanUniversity),andtheAssociationforReligion,EconomicsandCultureannualmeeting(atChapman

University).WewouldalsoliketothanktheEconomicScienceInstituteatChapmanUniversityforfundingthisresearch.
∗
Correspondingauthor.

E-mailaddress:[email protected](E.Schniter).

0167-2681/$–seefrontmatter© 2012 Elsevier B.V. All rights reserved.

http://dx.doi.org/10.1016/j.jebo.2012.09.011
E.Schniteretal./JournalofEconomicBehavior&Organization94 (2013) 242–256 243

orexperimentaldesignsusingdeception(Gibsonetal.,1999;Bottometal.,2002;NakayachiandWatabe,2005;Schweitzer

etal.,2006;OhtsuboandWatanabe,2009).

To study how damaged trust can be rebuilt and new trust can be encouraged, we conducted a non-deceptive study

whereinfinanciallymotivatedparticipantsusedendogenouslycreatedandnaturallydistributedpromisesandapologies.

Ourstudyisbasedonaversionofthe“investmentgame”byBergetal.(1995).Intheoriginalinvestmentgameaninvestoris

endowedwith$10andcaninvestanyportionofherendowmentbysendingittoatrustee.Theamountsenttriplesinvalue

beforereachingthetrustee.Havingreceivedfundsfromthistripledinvestment,thetrusteecanreciprocatebyreturning

anyportionofthesefundstotheinvestor.Sincesendingmoneyisrisky,investmentsareusuallyinterpretedastrust,and
sinc ereturn ing mone yisco stl y,re ciprocati onvia returnso ninves tm entsi sinterpreted ase vidence oftrustwor thi ness.1 The

investmentgame,therefore,hasbeenextensivelyusedtostudytrustandreciprocityinaninvestmentsetting(forareview

seeOstromandWalker,2005).Acommonfindingintheliteratureisthatinvestorstendtoexhibittrustandtrusteestendto

reciprocate.Ithasalsobeenwellestablishedthatpre-playcommunication,evenif“irrelevant”togamestrategy,caninduce

highercontributionsinpublicgoodsgames(formeta-analysesseeSally,1995;Balliet,2010)andmorecooperationindyadic

socialdilemmas(Deutsch,1958,1960;RadlowandWeidner,1966;Buchanetal.,2006;DuffyandFeltovich,2006;Bracht

andFeltovich,2009).However,withtheexceptionofafewstudiesusingdeception,theexperimentaleconomicliterature

is silent as to what behavior ensues when promises fail to establish trust and what happens to trust and reciprocity in

subsequentinteractionsafterpromisesarebrokenandtrustisdamaged.

Inthispaperwedescribeastudyusingtrustgamesthatexamineshowpromisesandmessagesareusedtobuildnew

trustwhereitdidnotpreviouslyexistandtorebuilddamagedtrust.Inthesegames,trusteesmadenon-bindingpromisesof

investment-contingentreturns,theninvestorsdecidedwhethertoinvest,andfinallytrusteesdecidedhowmuchtoreturn.

Afteranunexpectedsecondgamewasannounced,butbeforeitcommenced,trusteescouldsendaone-waymessage.This

designallowedustoobservetheendogenousemergenceandnaturaldistributionoftrust-relevantbehaviorsandfocuson

naturallyoccurringremedialstrategiesusedbypromise-breakersanddistrustedtrustees,theireffectsoninvestors,and

subsequentoutcomes.Inthefirstgame16.6%oftrusteesweredistrustedand18.8%oftrustedtrusteesbrokepromises.

Trusteesdistrustedinthefirstgameusedpromisesclosertoequalsplitsand–comparedtopreviouslytrustedpromise-

keepers–relativelylongermessagestoencouragenewtrustinthesecondgame.Promise-breakersusedrelativelyhigher

newpromises(comparedtoallothertrustees)andmessages(usuallywithapology)tosuccessfullyrestoredamagedtrust.

Onaverage,investmentsineachgamepaidoffforinvestorsandtrustees,suggestingthatthecontext-specificsignaling

describedabove,canfosterprofitabletrust-basedexchangesintheseeconomies.

2. Background

Whilemutuallybeneficialnon-bindingagreementshelprealizeopportunitiestogainfromasynchronoustrade,theyare

subjecttoexploitationbyunder-reciprocatorsornon-reciprocators.Ourresearchfocusesontrustees’cueandsignaleffects

oninvestortrustinasynchronousexchangesthatprovideopportunityformutualadvantage.Intheseexchanges,wedefine

trustasvoluntarilycedingresourcestoanotherintheexpectationthattheotherintendstoreciprocateinaccordancewith

signaledintentions.Trustworthinessisdefinedasreciprocation(ofresourcescededbytheinvestor)inaccordancewith

signaledintentions.

To successfully navigate a trust-based cooperative interaction and avoid exploitation by cheaters, it is important for

investorstoobtainaccurateinformationabouttheabilityandwillingness(propensity)oftrusteestocarryouttheirend

ofthecooperativedeal.Trustworthyreputationsthathavebeendemonstratedbypastactionsserveasreliablecuesupon

whichinvestorscanmaketrust-baseddecisions.Intheinitialinteractionswithunknownpartners,informativecuesabout

aninvestor’swillingnesstotrustoratrustee’strustworthinessareunavailable.Intheabsenceofinformationaboutthe
int eractants’ pastbehavio r, signal s2 ar eoftense nttoreceiversw ith theintention t oco mmunica te information about the

sender(e.g.seeFarrellandRabin,1996);forexample,thatthesenderistrustworthy.Wherecueshaveinformedinvestorsof

untrustworthiness,signalsmaybesentwiththeintentionofpersuadingthoseinvestorsthatthesenderismoretrustworthy

thaninferredfromthosecuesalone.

Signalsencouragingtrustappeartobeimportanttoolsfordevelopingmutuallybeneficialrelationshipsunderconditions

wheretrusthasnotyetbeenestablishedandwheretrusthasbeendamaged.Withouttheeffectiveuseofsignalscooperative

1 Thisinterpretationisbasedontheassumptionthatparticipantsidentifyandactinaccordancewithunstatedif–thenpropositionsandexpectotherstoas

well(Rousseau,1989),thoughthereisnocontractstatingexpectedorcontingentbehaviorintheclassic“investmentgame”(seeBergetal.,1995).Because

theassertionthattheoriginalgamewasuniversallyunderstoodtobeabout“trust”wasdebatable,JohnDickhautpreferredcallingitthe“investment

game”–asitisintheBergetal.(1995)article.Byaddinganewstartingstagetothegamewheretrusteesmakepromisestoreturnaportionofincome

frominvestment–thisgamebecomesagamemoreexplicitlyabouttrust.Forthisreasonwerefertoourmodifiedformoftheclassicinvestmentgame,

describedbelow,asa“trustgame.”
2 Wedi stinguis h cu esfro msignalsfromcoercion(borrowingfromsimilardefinitionsbyDiggleetal.,2007;Scott-Phillips,2008)asfollows.Cue.Any

behaviororfeaturethat(i)affectsthebehaviorofotherorganisms;(ii)whichiseffectivebecausetheeffecthasevolvedtobeaffectedbythebehavioror

feature;butwhich(iii)didnotevolve.Signal.Anybehaviororfeaturethat(i)affectsthebehaviorofotherorganisms;(ii)evolvedbecauseofthoseeffects;

and(iii)whichiseffectivebecausetheeffect(theresponse)hasevolvedtobeaffectedbythebehaviororfeature.Coercion.Anybehaviororfeaturethat

(i)affectsthebehaviorofotherorganisms;(ii)evolvedbecauseofthoseeffects;butwhich(iii)iseffectiveforsomereasonotherthanthattheeffecthas

evolvedtobeaffectedbythebehaviororfeature.
244 E.Schniteretal./JournalofEconomicBehavior&Organization94 (2013) 242–256

interactionsmaybeforegone:potentialinvestorsmaydecidenottoextendtrustwhentheylackreputationalinformation

andwhencuesindicateabreachoftrust.Further,whentrusthasbeendamaged,signalsgiveinvestorsaccesstorelevant

thoughinvisiblepropensitiesoftrustees,suchasinthecaseofrecalibratedupgradesintrustworthiness.Thisistruewhether

trusthasbeendamagedintentionallyorunintentionally(AxelrodandDion,1988).

Althoughsignalsthataccuratelyconveybehavioralpropensitiesarepotentiallyusefultobothsendersandreceivers,

signalersmaysend“dishonestsignals”tobenefitattheexpenseofreceivers.Criticalreceiverscanincurlowercoststhan

naïvereceivers(DawkinsandKrebs,1978;Maynard-Smith,1982),andsonaturalselectionfavorsthosereceiverswhocan

accuratelyassessthecost–benefittradeoffsassociatedwithemitters’signals,andcalibratetheirtrustfulnessaccordingly.

Zahavi(1975)addressedthequestionof“whyaresignalsreliable?”suggestingthatthehighproductioncostofasignal

guaranteesitsreliability,insofarastheproductioncostoutweighsthebenefitsgainedfromusingthesignaldeceptively,

butnotfromusingithonestly.Theprototypicalexampleisthemassiveandcolorfulpeacock’stail,indexingthepeacock’s

geneticqualityforpeahens’mateselection(Petrieetal.,1991).Inthissystem,costlysignalspersuadethereceiverswhile

cheapsignalsfailtodoso(Zahavi,1993;Grafen,1990).

Productioncostsarenottheonlywarrantorsofsignalreliability,however.Humanlanguage,whetherspokenorwrit-

ten,isanarbitrarycommunicationsystemthatoftenusesrelativelycheap-to-producesignalstonegotiatetrustbetween

individualswithconflictinginterests(Lachmannetal.,2001).Ifthesecheapsignalsareusedbyandrelieduponbyhumans

globallyandonaverage,whatexplainsthemaintenanceoftheirreliability?

Thereliabilityofcheapsignalsissupportedbytheactualityorthreatofsocialsanctionsthatcanmorethanoffsetthe

short-termbenefitsofcheatinganddeception(Rohwer,1977;Kiyonarietal.,2000;Mascletetal.,2003).Aselectiveregime

characterizedbyrepeatedinteractionsamongknownothers(Kelly,1995)hasledtopsychologicalmechanismsforsocial

exchangethatbalance(i)thecostsofmistakingaone-shotinteractionforarepeatedinteractionwith(ii)thefargreater

costsofmistakingarepeatedinteractionforaone-shotinteraction(Deltonetal.,2011).Hence,participantsinexplicitlyone-

shotanonymousexperimentsoftenbehaveasiftheyexpectrepeatedinteractionswithtrustworthy,intrinsicallyvaluable

partners(e.g.seeHoffmanetal.,1996;Kiyonarietal.,2000).

Whilethesanctioningoffalsesignalsandourtendencytoerrtocautionmayreducethefrequencyoffalsesignalsina

population,thoseindividualswhoexpecttoescapesanctionsmaybemoremotivatedtousesignalsdeceptively.Ineconomies

whereopportunitycostsofforgonetrust-basedexchangearelarger,receiverstendtotolerategreaterproportionsoffalse

signalstohonestsignals.Specifically,thelogicoferrormanagementtheory(forareviewseeHaseltonandNettle,2006)

predictsthatdespitetheexistenceoffalsesignalingandthecostsofreceivingfalsesignals,signalswilltendtobereceived

whenopportunitycostsassociatedwithnotreceivingtruesignalsoftrustworthiness(fromforgoneadvantageousexchange)

aregreaterthancostsassociatedwithreceivingfalsesignalsoftrustworthiness(i.e.whentheconsequentexchangeproduces

aloss).Thiseconomicallyjustifiedtoleranceofarateoffalsesignalingalsopredictsthatindividualswillexploitopportunities

tousedeception.Thisstudyexplorestheuseofcheapsignals(e.g.promisesofreciprocation,personalizedmessages,and

apologies)thatdonotdirectlyaffectpayoffsofthegame,orrequiremonetarycostsforproduction,yetarecommonfeatures

oftrust-basedinteractions.Personalizedcommunicationmayimprovecooperation(Orbelletal.,1988;BohnetandFrey,

1999;Ridingsetal.,2002;Zhengetal.,2002;Buchanetal.,2006)byfacilitatingcoordination,decreasingsocialdistance,

raisingsolidarity,andprovidingthecuesoffamiliaritythatarenormallyassociatedwithtrustworthyrelationships.Non-

bindingpromiseshavealsobeenshowntoincreasecooperation(RubinandBrown,1975;KerrandKaufman-Gilliland,1994;

ElingsenandJohannesson,2004;CharnessandDufwenberg,2006).Inrelationshipswheretrusthasbeendamaged,apologies

andexplanationshavebeenshowntoelicitforgiveness(Ohbuchietal.,1989;Tavuchis,1991;LewickiandBunker,1996;

BenoitandDrew,1997;GirardandMullet,1997;McCulloughetal.,1997,1998;Girardetal.,2002;Witvlietetal.,2002)and

promotefuturetrust(DeCremeretal.,2010).Thesestrategiesarebasedonsignalsthatarecheaptoproduce,raisingthe

questionsofhowpeopleusesignalsinthesecontexts;whenthesignalsachievetheirintendedeffects;andwhobenefits

fromtheiruse.

Insum,whilecheapsignalsarehelpfulforbuildingnewtrustandrebuildingdamagedtrusttoachieveefficientout-

comes,theycanbeuseddeceptivelyandmaybedistrusted,makingtheirreliabilitytenuous.Therefore,weexpectthat

inourexperimenttrusteeswhoseactionshavealreadyproducedreliablecuesestablishingtheirtrustworthyreputations

(bykeepingpromisesandnotsuccumbingtomoreprofitableopportunism)willbelessincentivized(thanpreviouslydis-

trustedtrustees,ortrusteeswhosereputationsindicateuntrustworthiness)tospendtimeandeffortconstructingmessages

topersuadeinvestorstotrustthem,whenthosemessagesmightbedistrusted.Previouslydistrustedtrusteeswhohave

notestablishedtrustworthinessanduntrustworthytrustees(i.e.promise-breakers)areexpectedtomakeuseofpromises

andmessagesinanattempttoaffectinvestors’decisionstotrust.Wealsoexpectthatwhenusedand“working”toaffect

investors’trust,signalsconveyingatrustworthypropensitywillprovidebenefitstobothinvestorandtrusteeonaverage.

3. Experimentaldesignandprocedures

TheexperimentwasconductedatChapmanUniversity’sESIlaboratory.458participants(229pairs)wererecruitedfrom

astandardcampus-widesubjectpoolforparticipationinanexperimentthatcouldlastupto45min.Participantsinteracted

witheachotheranonymouslyoveralocalcomputernetwork.Theexperiment,whichlastedanaverageof35mintotaland

didnotinvolvedeception,proceededasfollows.Uponarrival,participantsintheexperimentweretoldthattheywould

receive$7forparticipation,tobepaidattheendoftheexperiment.Participantsthenreceivedinstructions(seeAppendixA)
E.Schniteretal./JournalofEconomicBehavior&Organization94 (2013) 242–256 245

forasingletrustgamewith(i)noindicationofasubsequentgametofollowand(ii)nopromisesthattheexperimentwould

endatconclusionofthatgame.

Participantswereassignedtooneoftworoles:“ParticipantA”(investor),or“ParticipantB”(trustee).First,thetrustee

completedthefollowingstandardizedstatement(whichwewillrefertobelowasapromise)byselectinganaturalnumber

amountfrom0to20:“I(ParticipantB)promisetotransferback$ ofmyincometoyou(ParticipantA)ifyouchooseIN”.

Thisstatementwasnotbinding,however.Thatis,thetrusteewasnotobligatedtotransferbacktheamountpromisedtothe

investor,andbothtrusteeandinvestorknewthis.Thecomputerconveyedthetrustee’sstatementtotheinvestorandthen

theinvestorchoseeitherOUTorIN.IftheinvestorchoseOUT,shereceived$5andthetrustee$0.IftheinvestorchoseIN,

thenthetrusteereceived$20(the“income”),afterwhichheselectedawholedollaramountfrom$0to$20tosendbackto

theinvestor.

Afterthefirsttrustgame(Game1)finished,participantsweregiveninstructions(seeAppendixA)indicatingthatasecond

trustgame(Game2)wouldfollow.InGame2,participantsweretoldtheywouldremaininthesamerolesandinteractwith

thesamepartnerasinGame1.However,priortoGame2,thetrusteewasgivenanopportunitytouseatextboxtosenda

one-waymessagetotheinvestor.Trusteesweretoldthat“inthesemessages,nooneisallowedtoidentifyhimorherselfby

name,number,gender,orappearance,”butthatotherthantheserestrictions,trusteescould“sayanythinginthemessage.”

Iftrusteeswishednottosendamessagetheywereinstructedto“simplyclickonthesendbuttonwithouthavingtyped

anythinginthemessagebox.”Thecomputerconveyedthetrustee’smessageandsubsequentlythestandardizedpromise

totheinvestor,andthenGame2proceeded.WespecifiedthatGame2,whichhadthesamerulesasGame1,wasthelast
an dfin alpartof the expe riment ( i.e.therewo uld benosub sequ entga m es).3

Therewere25experimentalsessions.Eachsessionhadbetween10and24participants.Theaverageexperimentalearn-

ingswere$18,rangingfroma$0to$40,plus$7forarrivingtotheexperimentontimeandparticipating.Noparticipant

participatedmorethanonce,andnoparticipanthadpriorexperiencewithasimilargameenvironment.

4. Results

4.1. Game1

Weexpectthattrustees,awareofinvestorself-interestandmotivesforcriticalsignalreception,wouldpromiseinvestors

transfersofatleast$6(minimallyhigherthanthepayofftotheinvestorifhechoosesOUT)butlessthan$20(whichwould

providenobenefittothepromise-maker).Twoplausiblefocalpointsforpromisedreturnamountsarethemidpointofthe

$6–$19range,$12.5(thoughonlywholedollaramountslike$12or$13couldbechosen),andtheeven-splitof$10.Wary

thattrustees’mayhavelessincentivetohonorpromisescloserto$20thantotheeven-splitamountof$10,wealsoexpect

thatinvestorsshouldbemoresuspiciousoftheveracityofhigherpromisesandthereforelesslikelytoinvestinhigher

promises.Iftheminderrstocaution,aswehavesuggested,andinterpretstheone-shotgameaspotentiallyrepeatable,

trusteeswhohavebeentrustedshouldreciprocateenoughto,atminimum,provideinvestorsprofitablereturnsontheir

investments.Thesepredictionsstandinstarkcontrasttotherational(non-cooperative)choicepredictionsthatexpectnon-

bindingpromisestohavenoeffectoninvestors.Accordingtorationalchoicetheory,trusteeswhoreceiveincomesshould

returnnothing(despitewhattheymayhavepromised)and,basedonthis,investorsshouldalwayschoosetonotinvest

(regardlessofthepromisetheyreceived).

Fig.1displaystheaggregatedistributionofinvestmentandpromise-keepingdecisionsintheexperiment,whileFig.2

displaysthedistributionofpromisesmadebytrusteesinGame1.InGame1,trusteesonaveragepromisedtoreturn$9.20

(SD=2.38)outof$20and83.4%(191/229)ofinvestorschoseIN.

FirstweevaluatethedistributionsofGame1promisesassociatedwithtrustinganddistrustingdecisions,respectively,

andhowtheseinvestmentdecisionsaffectedinvestorandtrusteeearnings.ThedistributionofpromisesinFig.2indicates

that investors who chose IN received promises in the range of $6–$19 (99% of the time), with promises of $12 or $13

relativelyuncommon(1%ofthetime),andthepromiseof$10mostcommon(morethan50%ofthetime).Investorswho

choseOUTreceivedlowerpromisesonaverage(i.e.M =$8.61(SD =4.33)versusM =$9.31(SD =1.75);Wilcoxonrank-
1 1 2 2

sumtest,p-value=0.01,n =191,n =38),and,comparedtotrustedpromises,receivedeitherrelativelyloworrelatively
1 2

highpromisesoverall.Toconfirmthisobservation,weestimateprobitmodels(seeTable1,specifications1and2),wherethe

dependentvariableistheinvestmentdecisioninGame1andtheindependentvariablesaredummyvariablesforpromises

less than $9 and greater than $11, as well as the amounts of these promises. In specification (1), the dummy variables

arenegativeandsignificant,indicatingthatinvestorsarelesslikelytoinvestwhenpromisesareeitherrelativelylowor

relativelyhigh.Moreover,specification(2)indicatesthat,amongpromiseslowerthan$9,thereisapositivecorrelation

betweentheamountpromisedandtheprobabilityofinvestment.Ontheotherhand,amongpromiseshigherthan$11,

thereisanegativecorrelationbetweentheamountpromisedandtheprobabilityofinvestment.Inotherwords,promises

closertotheeven-splitof$10elicitahigherrateofINresponses.

3 Aftereachtrustgameparticipantswerealsoaskedtofillouta20itemsurveyinwhichtheyreportedtheiremotionalstatesconsequentontheir

decisions,gameinteractions,andresultingoutcomes.Analysisanddiscussionofthemediatingrolesofemotionsarenotincludedinthispaper.
246 E.Schniteretal./JournalofEconomicBehavior&Organization94 (2013) 242–256

Fig.1. AggregatedistributionofdecisionsinGames1and2.

InGame1,investmentyieldedgreaterpayoffsthannon-investmentforbothinvestorsandtrustees.Investorswhochose

IN received back $8.19 on average, which is more than their original endowment of $5 (Wilcoxon signed rank test, p-

value<0.01, n=191). Trusted trustees earned an average of $11.81, more than the $0 of distrusted trustees (Wilcoxon

rank-sumtest,p-value<0.01,n =38,n =191).TheOLSestimationofspecifications(3)and(4)inTable1indicatesthatthe
1 2

amountreturnedbytrusteeiscorrelatedwiththeamountpromised.Specifically,specification(3)indicatesthatbothlow

andhighpromisesarefollowedbylowerreturnedamounts.Moreover,specification(4)indicatesthatamountreturned

increasesasitgetsclosertotheeven-splitpromiseof$10.Theseresultssupporttherationaleforwhyinvestorsreceiving

especiallyhighorlowpromisesshouldtendtochooseOUT.

FortheinvestorswhochoseIN,themeanamountreturnedof$8.19wassignificantlylowerthanthemeantrustedpromise

of$9.31(Wilcoxonsignedranktest,p-value<0.01,n =n =191).Despitemeanreturnsbeinglowerthanpromised,wefind
1 2

thatpromisestendedtobeveridical:81.2%oftrustedpromises(155/191)werekept(i.e.theamountreturnedwasequalto

orgreaterthanthepromise),and18.8%(36/191)werebroken(i.e.theamountreturnedwaslessthanthepromise).Below

weusetheterms“promise-keepers”and“promise-breakers”torefertotrustedtrusteeswhoexactlymetorexceededtheir

IN 83.4% OUT 16.6%
100 30
0
9
0
8
0
7 0
2
cy 0 cy
n 6 n
e e
u 0 u
q 5 q
e e
Fr 40 Fr
0
0 1
3
0
2
0
1
0 0
0 2 4 6 8 10 12 14 16 18 20 0 2 4 6 8 10 12 14 16 18 20
P rom ise Prom ise
Fig.2. DistributionofpromisesinGame1(resultinginINorOUT).
E.Schniteretal./JournalofEconomicBehavior&Organization94 (2013) 242–256 247

Table1

Game1determinantsofinvestmentandreturn.

Dependentvariable Invest1 Invest1 Return1 Return1

Specification (1)Probit (2)Probit (3)OLS (4)OLS

Promise1<9 −0.83*** −4.81*** −1.77*** −6.92**

[dummyforpromiseslessthan9inGame1] (0.21) (1.07) (0.41) (2.77)
Promise1< 9× Promise1 0.60*** 0.72*

[amountpromisedinGame1forpromises<9] (0.16) (0.38)
Promise1> 11 −1.01** 8.44 −4.52*** 12.30*

[dummyforpromisesgreaterthan11inGame1] (0.41) (5.19) (0.95) (6.62)
Promise1> 11× Promise1 −0.55 * −1.11**

[amountpromisedinGame1forpromises>11] (0.30) (0.43)
Constant 1.35*** 1.35*** 8.81*** 8.81***

(0.15) (0.15) (0.21) (0.21)

Observations 229 229 191 191

Standarderrorsinparenthesis.

* Significantat10%.
** Significant at 5%.
*** Significant at 1%.

promisedamounts,andwhoreturnedlessthantheirpromisedamounts(whetherthereturnsweremonetarilyprofitable

totheinvestorsornot),respectively.

4.2. Game2

Whilecheapsignalsaremanipulatedbytrustees,affectinvestors,andprovidenetbenefitstobothinvestorsandtrusteesin

Game1,facilitatingprofitabletrust-basedexchangeswherepreviousreputationshadnotbeenestablished,Game2provides

usarelativelydifferentgameenvironmentinwhichtostudycheapsignals.InGame2,reputationshavebeenestablished

formanyinvestorsandtrustees–raisingthequestionofwhethertheuseofcheapsignalswillstillmatterwherecuesof

trustingandtrustworthybehavior(oritsabsence)areavailable.

InGame2,trusteespromisedtoreturn$9.79onaverage,ahigheramountthanthemeanof$9.20promisedinGame

1(Wilcoxonsignedranktest,p-value<0.01,n=229).Game2promisesresultedin87.3%(200/229)ofinvestorschoosing

IN,onlyslightlymorethanthe83.4%(191/229)ofINdecisionsmadeinGame1(Fisher’sexacttest,p-value=0.59,n=229).

TrusteereputationasestablishedinGame1andthenewpromisesissuedinGame2affectedinvestmentdecisionsinGame
2.Thee stimationo fp robitmodel s( specifi ca tion s1 and2 inTable 2)4ind ica testh at bothpro mise-break inginGam e 1and

promiseslowerthantheeven-splitinGame2elicitedlessinvestmentdecisionsinGame2.Overall,theinvestmentsmadein

Game2paidoff.InvestorswhochoseINreceivedback$8.73onaverage,whichismorethantheOUTpayoffof$5(Wilcoxon

signedranktest,p-value<0.01,n=200).Trustedtrusteesearnedanaverageof$11.27,morethanthe$0ofdistrustedtrustees

(Wilcoxonrank-sumtest,p-value<0.01,n =29,n =200).Theestimationofspecifications(3)and(4)inTable2indicates
1 2

thathigherpromisesinGame1,agreaterextentofunder-returnrelativetopromiseinGame1,andunevensplitpromises

inGame2allpredictloweramountsreturnedinGame2.Overall,andsimilartoGame1,promisesinGame2tendedto

beveridical;75%ofpromises(150/200)werekeptorexceeded,and25.0%(50/200)werebroken.Inthesectionsbelowwe

furtherexploretheeffectsofpromisesandmessagesonGame2investmentsandearningsacrossdifferent“types”ofdyads

aggregatedbyGame1decisions.

4.2.1. Promise-keepers

Forthesubsetof155Game1promise-keepingtrustees,weobservehigheraveragepromisesinGame2.Fig.3displays

thedistributionofGame2promisesresultinginINandOUTmadebythesepromise-keepers.Overall,thissetoftrustees

promisedtoreturnanaverageof$9.46inGame2,whichishigherthantheiraveragepromiseof$9.02inGame1(Wilcoxon

signedranktest,p-value<0.01,n =n =155).
1 2

Perhapsasaconsequenceofpromise-keepers’demonstratedtrustworthinessinGame1,theGame2investmentrate

of92.3%(143/155)inGame1promise-keeperswashigherthantheoverallinvestmentrateof83.4%(191/229)inGame1

(Fisher’sexacttest,p-value<0.01,n =155,n =229).Specifications(1)and(2)inTable3indicatethatmessageswithcontent
1 2
andprom isesc lose rtothe ev ensp lito f$10 pos itivel yaffectedinve stm ent in pr omise -k eepers.5

4 In estimation of Table 2, we have excluded variables corresponding to the amount promised in Game 1 (i.e. Promise1<9×Promise1 and
Promis e1>11×Pro mis e1),si nce the sevar iablesare highlycor relatedwithret urn s.Ne verthele ss,evenwh en these var iable sareinclu d e d theestim ates

inTable2areverysimilar.
5 Note t hat ines timatingtheseregressionswecannotincludebothreturnsinGame1andpromisesinGame1sinceforpromise-keeperstheyare
perfectly corr ela ted.Moreov er,we hadtoomi tva riableP romise2 >11× Promise 2s inceth e rear eonlythr ee observ at ionsg reat erthan$11,whic hma kes
Promise2 >11andPro mise2>11 ×Pr omis e2 almo stperfec tlycorrela t ed.
248 E.Schniteretal./JournalofEconomicBehavior&Organization94 (2013) 242–256

Table2

Game2determinantsofinvestmentandreturn.

Dependentvariable Invest2 Invest2 Return2 Return2

Specification (1)Probit (2)Probit (3)OLS (4)OLS

Promise1<9 −0.05 −0.07 −0.85 −0.97

[dummyforpromiseslessthan9inGame1] (0.36) (0.36) (0.79) (0.78)
Promise1> 11 −0.37 −0.21 2.67* 1.73

[dummyforpromisesgreaterthan11inGame1] (0.65) (0.70) (1.45) (1.47)
Return1 0.00 −0.02 0.02 0.03

[returninGame1] (0.12) (0.12) (0.26) (0.26)
Broken1 −0.80 * −0.84 * 0.86 1.86

[brokenpromiseinGame1] (0.48) (0.49) (1.33) (1.36)
Broken1× (Promise 1-R eturn1) −0.07 −0.10 −0.58 * −0.64**

[extentofunder-returnrelativetoGame1promise] (0.11) (0.12) (0.30) (0.30)
Distrusted 1 −0.22 −0.32 −1.53 −1.35

[nottrustedinGame1] (1.06) (1.10) (2.39) (2.38)
Promis e2<9 −1.37 *** −2.13 ** −1.66 ** −1.47

[dummyforpromiseslessthan9inGame2] (0.32) (0.88) (0.74) (2.79)
Promise2< 9× Promise2 0.11 −0.01

[amountpromisedinGame2forpromises<9] (0.12) (0.38)
Promise2> 11 −0.14 2.20 0.78 −12.01**

[dummyforpromisesgreaterthan11inGame2] (0.42) (1.90) (1.05) (4.64)
Promise2> 11× Promise2 −0.14 0.80***

[amountpromisedinGame1forpromises>11] (0.11) (0.28)
Constant 2.05* 2.26* 8.98*** 8.83***

(1.13) (1.17) (2.51) (2.48)

Observations 229 229 200 200

Standarderrorsinparenthesis.

* Significantat10%.
** Significant at 5%.
*** Significant at 1%.

Weexpectedthat,duetothegreaterreliabilityofavailablebehavioralcueswhichdemonstratedtheirtrustworthiness

(relativetothereliabilityofacheapsignal),Game1promise-keeperswouldbelessinclinedthanpromise-breakersand

distrustedtrusteestoconstructmessagesforthepurposeofpersuadinginvestorstochooseINinGame2,andsowould

sendbothshortermessagesandahigherproportionofemptymessagesinGame2.Supportingthatexpectation,Game

1promise-keepers’messagescontainedfewerwordsthanthosefromthesetincludingbothGame1distrustedtrustees

andGame1promise-breakers(M =11.41(SD =11.94)versusM =22.9(SD =22.37);Wilcoxonrank-sumtest,p<0.01,
1 1 2 2

n =155,n =74).Game1promise-keepers’messageswerealsomorefrequentlyemptythanthosefromthesetofboth
1 2

Game1distrustedtrusteesandGame1promise-breakers(20.6%versus10.8%ofthetime;Fisher’sexacttest,p-value=0.05,

n=229).

InvestmentsinGame1promise-keeperspaidoffforinvestorschoosingINinGame2.Theseinvestorsreceivedanaverage

of$8.62fromtrustees,asopposedtothe$5earnedfromOUT(Wilcoxonsignedranktest,p-value<0.01,n=143),with83.9%

IN 92.3% OUT 7.7%
100 30
0
9
0
8
0
7 0
2
cy 0 cy
n 6 n
e e
u 0 u
q 5 q
e e
Fr 40 Fr
0
0 1
3
0
2
0
1
0 0
0 2 4 6 8 10 12 14 16 18 20 0 2 4 6 8 10 12 14 16 18 20
Prom ise Pr omis e
Fig.3. DistributionofpromisesinGame2(resultinginINorOUT)byGame1promise-keepers.
E.Schniteretal./JournalofEconomicBehavior&Organization94 (2013) 242–256 249

Table3

Game2determinantsofinvestmentandreturnwithGame1promise-keepers.

Dependentvariable Invest2 Invest2 Return2 Return2

Specification (1)Probit (2)Probit (3)OLS (4)OLS

Return1 0.15 0.11 −0.01 −0.05

[returninGame1] (0.15) (0.15) (0.21) (0.21)
Message 0.63* 0.61 −0.24 −0.24

[messagewithcontent] (0.38) (0.38) (0.63) (0.63)
Promise2<9 −1.12 *** −4.39 ** −2.23 *** −9.13

[dummyforpromiseslessthan9inGame2] (0.43) (2.21) (0.69) (5.57)
Promise2< 9× Promise2 0.45 0.92

[amountpromisedinGame2forpromises<9] (0.30) (0.74)
Promise2> 11 −1.83** −1.82 ** 9.12*** 9.08***

[dummyforpromisesgreaterthan11inGame2] (0.80) (0.81) (2.01) (2.00)
Constant 0.29 0.63 9.23*** 9.58***

(1.42) (1.47) (2.04) (2.06)

Observations 155 155 143 143

Standarderrorsinparenthesis.

* Significantat10%.
** Significant at 5%.
*** Significant at 1%.

(120/143)ofthepromiseskeptorexceeded,and16.1%(23/143)broken.Comparedto$0earnedbythoseGame1promise-

keepersthatwerenottrustedinGame2,promise-keepersalsoprofitedfromtrustedpromisesinGame2,earning$11.38

on average (Wilcoxon rank-sum test, p-value<0.01, n =12, n =143). Specifications (3) and (4) in Table 3 indicate that
1 2

Game2promiseslowerandhigherthantheeven-splitareassociatedwithlowerandhigheramountsreturnedbyGame1

promise-keepers,respectively.Whetherthemessageshavecontentornot,ontheotherhand,hasnoeffectonreturns.

4.2.2. Promise-breakers

Amajorquestionourdataaddressconcernswhathappensafterabreachoftrustwhenafreshopportunityforcooperation

arises:Howtrusteesbehave,howinvestorsrespond,andwhatoutcomesareachieved.Herewefocusonthe18.8%(36/191)

ofpairswithbrokenpromisesinGame1(i.e.wheretheamountreturnedwaslowerthantheamountpromised).These

brokenpromisesrepresentbreachesoftrustandtherelationshipsthatimmediatelyfollowareconsideredtohavedamaged

trust(becausetrust-basedexpectationswerenotmet).Acentralquestionmotivatingthisstudyiswhethersignalssuchas

newpromisesandapologiescan(i)restoreinvestors’willingnesstotrustand(ii)facilitatetheachievementofhigherjoint

payoffs.
Fig.4displaysthedistributionofpromisesmadeby36Game1promise-breakersinGame2resultinginINandOUT

decisions.Promise-breakerspromised$12.11inGame2,whichissignificantlyhigherthantheiraveragepromiseof$10.58

inGame1(Wilcoxonsignedranktest,p-value=0.01,n =n =36).Theextentofupgradedpromises(Promise2–Promise1)
1 2

by promise-breakers is also significantly higher than the extent of upgraded promises by promise-keepers (M =1.53
1

(SD =3.70)versusM =0.44(SD =1.79);Wilcoxonrank-sumtest,p-value<0.01,n =36,n =155).Assumingthatmanyof
1 2 2 1 2

IN 69.4% OUT 30.6%
5 5
1 1
0 0
y 1 y 1
c c
n n
e e
u u
q q
e e
Fr Fr
5 5
0 0
0 2 4 6 8 10 12 14 16 18 20 0 2 4 6 8 10 12 14 16 18 20
Prom ise Prom ise
Fig.4. DistributionofpromisesinGame2(resultinginINorOUT)byGame1promise-breakers.
250 E.Schniteretal./JournalofEconomicBehavior&Organization94 (2013) 242–256

Table4

Game2determinantsofinvestmentandreturnwithGame1promise-breakers.

Dependentvariable Invest2 Invest2 Return2 Return2

Specification (1)Probit (2)Probit (3)OLS (4)OLS

Return1 0.10 −0.11 0.69*** 1.15**

[returninGame1] (0.08) (0.15) (0.24) (0.46)
Promise2– Pr omise1 0.21* −0.46

[promiseadjustment] (0.13) (0.45)
Promise1–R eturn1 −0.21* 0.46
[extentofunder-returnrelativetoGame1promise] (0.13) (0.45)
Apology 1.88*** 1.88*** 2.69 2.69

[messagewithapology] (0.68) (0.68) (3.19) (3.19)
Promise2 −0.09 0.13 0.37 −0.09

[amountpromisedinGame2] (0.12) (0.08) (0.48) (0.29)
Constant −0.56 −0.56 −1.90 −1.90

(1.58) (1.58) (6.24) (6.24)

Observations 36 36 25 25

Standarderrorsinparenthesis.

* Significantat10%.
** Significant at 5%.
*** Significant at 1%.

theinvestorswhosetrusthadpreviouslybeendamagedwouldbeinclinedtochooseOUT,itappearsthatpromiseupgrades

partiallyrestoretrust,since69.4%(25/36)ofinvestorswhosetrustwasdamagedinGame1choseINagain.

Inadditiontopromiseupgrades,wealsofindthatGame1promise-breakersfrequentlyusedmessages.TableC1reportsall

messagesthatweresentby36promise-breakers.Analyzingthemessages,wefindthat83.3%(30/36)ofthemessageshave
somecon tent. 6 Gam e1 pro mi se-breakers’messa gescontai nm orewords th anm essa gesfro mGam e 1pr omise-kee pers

(M =19.06 (SD =19.03) versus M =11.41 (SD =11.94); Wilcoxon rank-sum test, p-value=0.03, n =36, n =155), sug-
1 1 2 2 1 2

gestingthatthebehavioralcueoftrustworthinessmadeverbalpersuasionforcontinuedinvestmentlessdeterminantof

re-investmentandlessnecessaryfortrustees.

Tofurtherclassifyall36messages,weusedanincentivizedlaboratorycoordinationgame(HouserandXiao,2011).Three
coder srecrui tedfrom th es ubjectpoo la ndbl ind tothehypo theses7 we reaskedtoc odeea chmess age twice :first based

onwhetherornotitconformedtoa“broad”definitionofapology(anexplicitorimplicitacknowledgmentofoffense),and

secondbasedonwhetherornotitconformedtoa“narrow”definitionofapology(anexplicitorimplicitacknowledgment

ofoffense,alongwithremorse,regret,orsorrowstemmingfromacknowledgmentoftheoffense).All6messageswithout

contentwerecodedbyallcodersasnotconformingtothebroaddefinitionandnotconformingtothenarrowdefinitionof

apology.Ofthe30messageswithcontent,28werecodedbythemajorityofcodersasconformingtothebroaddefinitionof
apology and 13 we recodedb ythe majorit yo fcode rsasc onf orm ingtoth en arrow de finitionofap ol ogy .8

Whenusingabroaddefinitionofapology,whichwascodedwith“substantial”agreement(Kappaof0.70),wefindthat

82.1%(23/28)ofapologizerswereretrustedinGame2incomparisontoonly25.0%(2/8)ofnon-apologizers(Fisher’sexact

test,p-value<0.01,n=36),suggestingthatmessageswithapologyaremorelikelytorestoretrustafterbrokenpromises
than emptym essag es o rm essageswit hout apology.9 Due tothelow er interr aterre lia bilityfo rmes sages coded according

tothenarrowdefinition,wewillconsideronlythebroaddefinitionofapologyinthesubsequentanalyses.

Thusfar,wehaveonlyconsideredtheindependenteffectsofnewpromisesandapologiesinrestoringdamagedtrust,but

recognizethattheseremedialstrategiesareoftenusedjointly.AmongGame1promise-breakers,thesizeoftheupgradein

amountpromisedissignificantlylargerforparticipantsissuingapologiesthanforthosewhodidnot(M =$1.68(SD =3.10)
1 1

versusM =$1(SD =5.55);Wilcoxonrank-sumtest,p-value=0.05,n =28,n =10).Whentheapologeticpromise-breakers
2 2 1 2

arecomparedtoallothertrusteesthedifferenceisevenlarger.Theupgradeinamountpromisedforapologetictrustees

isalmostfourtimesgreaterthanamongallothertrustees(M =$1.68(SD =3.10)versusM =$0.44(SD =2.68);Wilcoxon
1 1 2 2

rank-sumtest,p-value=0.05,n =28,n =201),indicatingthatapologetictrusteesupgradedtheirpromisesmost.
1 2

Next,weestimateprobitregressions(seeTable4)toidentifyhowtheseremedialstrategiesworkinconjunction.Spec-

ification (1) indicates that the two most significant predictors of trust in Game 2 are promise adjustments (specifically

promiseupgrades)andapologies.Specification(2)showsthatinadditiontrustisnegativelyaffectedbytheextentofunder-

6 Wefindthat80%(24/30)ofmessageswithcontentrestoredtrust(i.e.whereinvestorschoseINinGame2afterhavingsufferedbrokenpromisesin

Game1),asopposedtoonly16.7%(1/6)ofmessageswithoutcontent.Thesedifferencesaresignificant(Fisher’sexacttest,p-value<0.01,n=36).
7 Th ein st ructions for code rsand deta ils abouthow theyw erepaid areat tachedinA ppe ndixA.Cod erseach earne dan average o f$28 .3 3 formatched

codings,plus$7forarrivingontimeandparticipating.
8 Weu seas tan da rdappro ach from con tentanalysismethodologytocalculateCohen’sKappainterrateragreementcoefficient(Cohen,1960;Krippendorff,

2004).Kappavaluesbetween0.41and0.60areconsidered“Moderate”agreement,andthoseabove0.60indicate“Substantial”agreement(LandisandKoch,

1977).WefindKappavaluesof0.70and0.53forthebroadandnarrowdefinitionsofapology,respectively.
9 Wh en using anarr owdefi ni tion ofap olog y,w hich wasc ode dwithm oderateag ree ment(Ka ppaof0.53),wefindthat84.6%(11/13)ofapologizerswere

retrustedincomparisontoonly60.9%(14/23)ofnon-apologizers(Fisher’sexacttest,p-value=0.13,n=36).
E.Schniteretal./JournalofEconomicBehavior&Organization94 (2013) 242–256 251

return relative to Game 1 promise. Moreover, based on the likelihood-ratio test, we find that the promise adjustment,

upgraded relative to the extent of under-return on previously broken promise (i.e. Promise2–(Promise1–Return1)), posi-

tivelyandsignificantlyinfluencestrustinGame2(likelihood-ratiotest,p-value=0.05).Theseresultsindicatethatinvestors’

decisions to re-invest are sensitive not just to the existence of broken promises (specifications 1 and 2 in Table 2), but

alsototheextentofunder-returnrelativetoGame1promise,apologies,andupgradedpromises(specifications1and2in

Table4).

Wehavearguedthatsignalssuchasapologiesandpromisesshouldhaveevolvedonlyiftheyprovidednetbenefitsto

boththesendersandreceiversofthosesignalsonaverageandovertheevolutionofthecommunicationsystem.Weevaluate

whetherGame1promise-breakers’signalsresultedinbenefitsforbothinvestorandtrusteeinGame2,andwhetherthese

signals were reliable indicators of subsequent trustee behaviors. Investors in Game 1 promise-breakers were returned

$7.28onaverage,whichissignificantlyhigherthantheOUTpayoffof$5(Wilcoxonsignedranktest,p-value=0.05,n=25).

Moreover,Game1promise-breakersreturnedsignificantlymoreinGame2thaninGame1(M =$7.28(SD =4.86)versus
1 1

M =$4.60(SD =3.72);Wilcoxonsignedranktest,p-value<0.01,n =n =25).Thisisalsotruewhenwelookatinvestments
2 2 1 2

inthesubsetof23outof28trusteeswhoissuedapologiesandwhereretrusted:theyreturnedsignificantlymoreinthesecond

game(M =$7.52(SD =4.81)versusM =$4.61(SD =3.64);Wilcoxonsignedranktest,p-value<0.01,n=23),whichisalso
1 1 2 2

significantlyhigherthantheOUTpayoff(M =$7.52(SD =4.81)versusM =$5;Wilcoxonsignedranktest,p-value=0.03,
1 1 2

n=23).

AlthoughinvestmentsinGame2paidoff,westillfindthat60.0%(15/25)ofre-trustedpromise-breakerssubsequently

broketheirpromisesagaininGame2–almostirrespectiveoftheapologiesandnewadjustedpromises.Fromspecifications

(3)and(4)inTable4,itappearsthatneitherpromisesadjustments,newamountspromised,norapologiesarepredictiveof

returninGame2.TheonlyvariablethatpredictsreturninGame2isreturninGame1.

4.2.3. Distrusted

Asmentionedabove,16.6%oftrustees(38outof229)werenottrustedinGame1(seeFig.1).Thesourceofthisdistrust

appearstobe:(i)thehighervariancearoundtheeven-splitpointofthedistributionofdistrustedpromises(relativetothat

ofthedistributionoftrustedpromises;seerightpanelofFig.2),and(ii)alowerdegreeofdefaulttrustfulnessamongGame

1distrustfulinvestor(accountingforthefactthatasizeablenumberofeven-splitpromiseswererejected).Inparticular,

inGame1,55.3%(21/38)ofdistrustedtrusteespromisedlessthan$9whileanother10.5%(4/38)ofthempromisedmore

than$11.AswithourGame1predictionsoftrustedpromises,weexpectthatpreviouslydistrustedtrusteeswouldadjust

theirGame2promisestowardsthemodalandmoretrustedpromiseof$10,thattheseadjustmentswouldaffectdecisions

toinvest,andthatinvestmentsmadebasedonadjustedpromiseswouldbenefitboththeinvestorandtrustee.

FirstweevaluatewhetherGame1distrustedtrusteesadjusttheirpromisesasweexpected,andifadjustmentsofpromises

byGame1distrustedtrusteesaffectinvestmentdecisions.TrusteeswhoweredistrustedinGame1promisedanaverage

of$8.92inGame2,whichissimilartotheiraveragepromiseof$8.61inGame1(Wilcoxonsignedranktest,p-value=0.45,

n =n =38), yet most investors (84.2% or 32/38) who did not trust in Game 1 chose IN in Game 2. Fig. 5 displays the
1 2

histogramofpromisesmadeinGame2bythe38trusteeswhoweredistrustedinGame1.Distrustedtrusteeschangedtheir

distributionofpromisestowardsmoreequalsplits:66.7%(14/21)oftrusteeswhopromisedlessthan$9inGame1increased

theirGame2promisesand100%(4/4)oftrusteeswhopromisedmorethan$11inGame1decreasedtheirGame2promises.

Correspondingly,amongpreviouslyun-trustinginvestors,92.6%(13/14)ofthosewhoreceivedincreasedpromisesand100%

(4/4)ofthosewhoreceivedthedecreasedpromiseschoseINinGame2.

IN 84.2% OUT 15.8%
5 5
1 1
0 0
y 1 y1
c c
n n
e e
u u
q q
e e
Fr Fr
5 5
0 0
0 2 4 6 8 10 12 14 16 18 20 0 2 4 6 8 10 12 14 16 18 20
P romi se P rom ise
Fig.5. DistributionofpromisesinGame2(resultinginINorOUT)byGame1distrustedtrustees.