IDEAS home Printed from https://ideas.repec.org/a/eee/jobhdp/v114y2011i2p75-86.html
   My bibliography  Save this article

In money we trust? The use of financial compensations to repair trust in the aftermath of distributive harm

Author

Listed:
  • Desmet, Pieter T.M.
  • Cremer, David De
  • Dijk, Eric van

Abstract

Trust is vital yet vulnerable in economic exchange relations. In these relations, a widely used strategy in response to distributive harm consists of having the transgressor pay a financial compensation to the victim. This research examines whether financial compensations can increase trust towards a transgressor, and whether the size of the compensation is relevant to this process. We hypothesized and found that whether larger compensations will elicit more trust, depends on how clear the perpetrator's intention to transgress was. Experiment 1 revealed that trust perceptions increased more by a slight overcompensation of the inflicted harm as compared to an exact or a partial compensation, but not if the transgressor's bad intentions became clear through the use of deception in the violation. In Experiments 2 and 3, we replicated these findings and further showed that it is not the use of deception per se, but rather the attribution of bad intent that moderates the effect of compensation size. Experiment 4, using a trust game paradigm revealed that this effect not only occurs for small overcompensations, but also for larger overcompensations.

Suggested Citation

  • Desmet, Pieter T.M. & Cremer, David De & Dijk, Eric van, 2011. "In money we trust? The use of financial compensations to repair trust in the aftermath of distributive harm," Organizational Behavior and Human Decision Processes, Elsevier, vol. 114(2), pages 75-86, March.
    • Handle: RePEc:eee:jobhdp:v:114:y:2011:i:2:p:75-86
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0749-5978(10)00089-0
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Cremer, David De & Knippenberg, Daan van, 2004. "Leader self-sacrifice and leadership effectiveness: The moderating role of leader self-confidence," Organizational Behavior and Human Decision Processes, Elsevier, vol. 95(2), pages 140-155, November.
    2. Schweitzer, Maurice E. & Hershey, John C. & Bradlow, Eric T., 2006. "Promises and lies: Restoring violated trust," Organizational Behavior and Human Decision Processes, Elsevier, vol. 101(1), pages 1-19, September.
    3. Falk, Armin & Fehr, Ernst & Fischbacher, Urs, 2008. "Testing theories of fairness--Intentions matter," Games and Economic Behavior, Elsevier, vol. 62(1), pages 287-303, January.
    4. Matthew Rabin, 1998. "Psychology and Economics," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 11-46, March.
    5. Blount, Sally, 1995. "When Social Outcomes Aren't Fair: The Effect of Causal Attributions on Preferences," Organizational Behavior and Human Decision Processes, Elsevier, vol. 63(2), pages 131-144, August.
    6. De Cremer, David & Van Kleef, Gerben A., 2009. "When being overpaid makes me feel good about myself: It depends on how the other feels," Journal of Economic Psychology, Elsevier, vol. 30(5), pages 793-802, October.
    7. McCabe, Kevin A. & Rigdon, Mary L. & Smith, Vernon L., 2003. "Positive reciprocity and intentions in trust games," Journal of Economic Behavior & Organization, Elsevier, vol. 52(2), pages 267-275, October.
    8. Webster, Cynthia & Sundaram, D. S., 1998. "Service consumption criticality in failure recovery," Journal of Business Research, Elsevier, vol. 41(2), pages 153-159, February.
    9. William P. Bottom & Kevin Gibson & Steven E. Daniels & J. Keith Murnighan, 2002. "When Talk Is Not Cheap: Substantive Penance and Expressions of Intent in Rebuilding Cooperation," Organization Science, INFORMS, vol. 13(5), pages 497-513, October.
    10. Pillutla, Madan M. & Murnighan, J. Keith, 1996. "Unfairness, Anger, and Spite: Emotional Rejections of Ultimatum Offers," Organizational Behavior and Human Decision Processes, Elsevier, vol. 68(3), pages 208-224, December.
    11. Kim, Peter H. & Dirks, Kurt T. & Cooper, Cecily D. & Ferrin, Donald L., 2006. "When more blame is better than less: The implications of internal vs. external attributions for the repair of trust after a competence- vs. integrity-based trust violation," Organizational Behavior and Human Decision Processes, Elsevier, vol. 99(1), pages 49-65, January.
    12. Matthew Rabin & Joel L. Schrag, 1999. "First Impressions Matter: A Model of Confirmatory Bias," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(1), pages 37-82.
    13. Colin F. Camerer & Richard H. Thaler, 1995. "Anomalies: Ultimatums, Dictators and Manners," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 209-219, Spring.
    14. Berg Joyce & Dickhaut John & McCabe Kevin, 1995. "Trust, Reciprocity, and Social History," Games and Economic Behavior, Elsevier, vol. 10(1), pages 122-142, July.
    15. De Cremer, David & van Dijk, Eric & Pillutla, Madan M., 2010. "Explaining Unfair Offers in Ultimatum Games and their Effects on Trust: An Experimental Approach," Business Ethics Quarterly, Cambridge University Press, vol. 20(1), pages 107-126, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yuval Feldman & Tom R. Tyler, 2012. "Mandated justice: The potential promise and possible pitfalls of mandating procedural justice in the workplace," Regulation & Governance, John Wiley & Sons, vol. 6(1), pages 46-65, March.
    2. Kim, Peter H. & Cooper, Cecily D. & Dirks, Kurt T. & Ferrin, Donald L., 2013. "Repairing trust with individuals vs. groups," Organizational Behavior and Human Decision Processes, Elsevier, vol. 120(1), pages 1-14.
    3. Desmet, Pieter T.M. & Leunissen, Joost M., 2014. "How many pennies for your pain? Willingness to compensate as a function of expected future interaction and intentionality feedback," Journal of Economic Psychology, Elsevier, vol. 43(C), pages 105-113.
    4. Dhaliwal, Nathan A. & Patil, Indrajeet & Cushman, Fiery, 2021. "Reputational and cooperative benefits of third-party compensation," Organizational Behavior and Human Decision Processes, Elsevier, vol. 164(C), pages 27-51.
    5. Livia Levine, 2019. "Digital Trust and Cooperation with an Integrative Digital Social Contract," Journal of Business Ethics, Springer, vol. 160(2), pages 393-407, December.
    6. Haesevoets, Tessa & Van Hiel, Alain & Reinders Folmer, Chris & De Cremer, David, 2014. "What money can’t buy: The psychology of financial overcompensation," Journal of Economic Psychology, Elsevier, vol. 42(C), pages 83-95.
    7. Pieter T. M. Desmet & Franziska Weber, 2022. "Infringers’ willingness to pay compensation versus fines," European Journal of Law and Economics, Springer, vol. 53(1), pages 63-80, February.
    8. Jundong Hou & Chi Zhang & Robert Allen King, 2018. "Measuring trust damage in nonprofit marketing: the role of cognitive and emotional perceptions," International Review on Public and Nonprofit Marketing, Springer;International Association of Public and Non-Profit Marketing, vol. 15(1), pages 25-47, March.
    9. Ben Gilbert & Alexander James & Jason F. Shogren, 2018. "Corporate apology for environmental damage," Journal of Risk and Uncertainty, Springer, vol. 56(1), pages 51-81, February.
    10. Friehe, Tim & Hippel, Svenja & Schielke, Anne, 2021. "Appeasing yourself or others? – The use of self-punishment and compensation and how it influences punishment," Journal of Economic Psychology, Elsevier, vol. 84(C).
    11. Haesevoets, Tessa & Reinders Folmer, Chris & De Cremer, David & Van Hiel, Alain, 2013. "Money isn’t all that matters: The use of financial compensation and apologies to preserve relationships in the aftermath of distributive harm," Journal of Economic Psychology, Elsevier, vol. 35(C), pages 95-107.
    12. Gasparotto, Lisiane Santos & Pacheco, Natália Araujo & Basso, Kenny & Corte, Vitor Francisco Dalla & Rabello, Gisele Costa & Gallon, Shalimar, 2018. "The role of regulation and financial compensation on trust recovery," Australasian marketing journal, Elsevier, vol. 26(1), pages 10-16.
    13. Tessa Haesevoets & Chris Reinders Folmer & Alain Van Hiel, 2015. "Is Trust for Sale? The Effectiveness of Financial Compensation for Repairing Competence- versus Integrity-Based Trust Violations," PLOS ONE, Public Library of Science, vol. 10(12), pages 1-13, December.
    14. van Gils, Suzanne & Horton, Kate E., 2019. "How can ethical brands respond to service failures? Understanding how moral identity motivates compensation preferences through self-consistency and social approval," Journal of Business Research, Elsevier, vol. 95(C), pages 455-463.
    15. Kähkönen, T. & Blomqvist, K. & Gillespie, N. & Vanhala, M., 2021. "Employee trust repair: A systematic review of 20 years of empirical research and future research directions," Journal of Business Research, Elsevier, vol. 130(C), pages 98-109.
    16. Janne Doorn & Marcel Zeelenberg & Seger M. Breugelmans, 2018. "An exploration of third parties’ preference for compensation over punishment: six experimental demonstrations," Theory and Decision, Springer, vol. 85(3), pages 333-351, October.
    17. Luiza Venzke Bortoli & Valeria Freundt, 2017. "Effects of Voluntary Product Recall on Consumer’s Trust," Brazilian Business Review, Fucape Business School, vol. 14(2), pages 204-224, March.
    18. Leunissen, Joost M. & Cremer, David De & Reinders Folmer, Christopher P., 2012. "An instrumental perspective on apologizing in bargaining: The importance of forgiveness to apologize," Journal of Economic Psychology, Elsevier, vol. 33(1), pages 215-222.
    19. Lei, Vivian & Masclet, David & Vesely, Filip, 2014. "Competition vs. communication: An experimental study on restoring trust," Journal of Economic Behavior & Organization, Elsevier, vol. 108(C), pages 94-107.
    20. Anna M. Cianci & Shana M. Clor-Proell & Steven E. Kaplan, 2019. "How Do Investors Respond to Restatements? Repairing Trust Through Managerial Reputation and the Announcement of Corrective Actions," Journal of Business Ethics, Springer, vol. 158(2), pages 297-312, August.
    21. Pieter Desmet & David Cremer & Eric Dijk, 2010. "On the Psychology of Financial Compensations to Restore Fairness Transgressions: When Intentions Determine Value," Journal of Business Ethics, Springer, vol. 95(1), pages 105-115, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Haesevoets, Tessa & Van Hiel, Alain & Reinders Folmer, Chris & De Cremer, David, 2014. "What money can’t buy: The psychology of financial overcompensation," Journal of Economic Psychology, Elsevier, vol. 42(C), pages 83-95.
    2. De Cremer, David, 2010. "To pay or to apologize? On the psychology of dealing with unfair offers in a dictator game," Journal of Economic Psychology, Elsevier, vol. 31(6), pages 843-848, December.
    3. Ernst Fehr & Klaus M. Schmidt, "undated". "Theories of Fairness and Reciprocity - Evidence and Economic Applications," IEW - Working Papers 075, Institute for Empirical Research in Economics - University of Zurich.
    4. Leunissen, Joost M. & Cremer, David De & Reinders Folmer, Christopher P., 2012. "An instrumental perspective on apologizing in bargaining: The importance of forgiveness to apologize," Journal of Economic Psychology, Elsevier, vol. 33(1), pages 215-222.
    5. Haesevoets, Tessa & Reinders Folmer, Chris & De Cremer, David & Van Hiel, Alain, 2013. "Money isn’t all that matters: The use of financial compensation and apologies to preserve relationships in the aftermath of distributive harm," Journal of Economic Psychology, Elsevier, vol. 35(C), pages 95-107.
    6. Schniter, Eric & Sheremeta, Roman M. & Sznycer, Daniel, 2013. "Building and rebuilding trust with promises and apologies," Journal of Economic Behavior & Organization, Elsevier, vol. 94(C), pages 242-256.
    7. Dijke, Marius van & Cremer, David De, 2011. "When social accounts promote acceptance of unfair ultimatum offers: The role of the victim's stress responses to uncertainty and power position," Journal of Economic Psychology, Elsevier, vol. 32(3), pages 468-479, June.
    8. Eric Schniter & Roman M. Sheremeta & Daniel Sznycer, 2011. "Restoring Damaged Trust with Promises, Atonement and Apology," Working Papers 11-18, Chapman University, Economic Science Institute.
    9. Fehr, Ernst & Schmidt, Klaus M., 2005. "The Economics of Fairness, Reciprocity and Altruism – Experimental Evidence and New Theories," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 66, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    10. Daniel Woods & Maroš Servátka, 2019. "Nice to you, nicer to me: Does self-serving generosity diminish the reciprocal response?," Experimental Economics, Springer;Economic Science Association, vol. 22(2), pages 506-529, June.
    11. Lei, Vivian & Masclet, David & Vesely, Filip, 2014. "Competition vs. communication: An experimental study on restoring trust," Journal of Economic Behavior & Organization, Elsevier, vol. 108(C), pages 94-107.
    12. Falk, Armin & Fischbacher, Urs, 2006. "A theory of reciprocity," Games and Economic Behavior, Elsevier, vol. 54(2), pages 293-315, February.
    13. Fischbacher, Urs & Utikal, Verena, 2013. "On the acceptance of apologies," Games and Economic Behavior, Elsevier, vol. 82(C), pages 592-608.
    14. Strassmair, Christina, 2009. "Can intentions spoil the kindness of a gift? - An experimental study," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 302, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    15. Xiao, Erte & Bicchieri, Cristina, 2010. "When equality trumps reciprocity," Journal of Economic Psychology, Elsevier, vol. 31(3), pages 456-470, June.
    16. Bruni, Luigino & Tufano, Fabio, 2017. "The value of vulnerability: The transformative capacity of risky trust," Judgment and Decision Making, Cambridge University Press, vol. 12(4), pages 408-414, July.
    17. Levine, Emma E. & Schweitzer, Maurice E., 2015. "Prosocial lies: When deception breeds trust," Organizational Behavior and Human Decision Processes, Elsevier, vol. 126(C), pages 88-106.
    18. Dohmen, Thomas, 2014. "Behavioral labor economics: Advances and future directions," Labour Economics, Elsevier, vol. 30(C), pages 71-85.
    19. Kamas, Linda & Preston, Anne, 2012. "Distributive and reciprocal fairness: What can we learn from the heterogeneity of social preferences?," Journal of Economic Psychology, Elsevier, vol. 33(3), pages 538-553.
    20. James Cox & Klarita Sadiraj & Vjollca Sadiraj, 2008. "Implications of trust, fear, and reciprocity for modeling economic behavior," Experimental Economics, Springer;Economic Science Association, vol. 11(1), pages 1-24, March.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jobhdp:v:114:y:2011:i:2:p:75-86. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/obhdp .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.