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Trustworthy by design

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  • Geng, Sen
  • Guan, Menglong

Abstract

We explore theoretically and experimentally whether information design can be used by trustees as a signaling device to boost trusting acts. In our main setting, a trustee partially or fully decides a binary payoff allocation and designs an information structure, then a trustor decides whether to invest. In the control setting, information design is not available. In line with the standard equilibrium analysis, we find that introducing information design increases trustworthiness and trusting acts, and some trustees choose full trustworthiness with the most informative structure. We also find systematic behavioral deviations, including some trustees' choosing zero trustworthiness with the least informative structure and trustors' overtrusting in low informative structures. We finally provide a model of heterogeneity in prosociality and strategic sophistication, which rationalizes the experimental findings.

Suggested Citation

  • Geng, Sen & Guan, Menglong, 2023. "Trustworthy by design," Games and Economic Behavior, Elsevier, vol. 141(C), pages 70-87.
    • Handle: RePEc:eee:gamebe:v:141:y:2023:i:c:p:70-87
    DOI: 10.1016/j.geb.2023.05.009
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    More about this item

    Keywords

    Trust; Trustworthiness; Information design; Prosociality; Strategic sophistication;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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