Online markets and trust

Markets may shape trust and trustworthiness. In this paper, we first report results from a one-shot trust game conducted in a lab-in-the-field experiment with villagers in a rural county in northern China. Experimental results suggest that the experience as online market sellers improves individuals’ level of trustworthiness. To provide more rigorous causal evidence and insights on the underlying mechanisms, we then conducted a laboratory experiment, in which subjects played an infinitely repeated market game with asymmetric information; both before and after the market game, subjects made choices in a one-shot trust game. We do not find that the ex-post choices in the trust game differ between those playing the market game and those conducting a real-effort task instead, except that when the market game does not have a reputation system, buyers become less trustworthy afterward—adding a voluntary reputation system similar to the real-world online rating system help mitigate such a detrimental effect.