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Trust, Expectations and Optimism Bias: an Experimental Study

Author

Listed:
  • Avtonomov, Y.

    (National Research University Higher School of Economics, Moscow, Russia)

  • Elizarova, E.

    (International College of Economics and Finance, Moscow, Russia)

Abstract

Despite its role in facilitating economic interactions and increasing social welfare, trust doesn't fit well with the standard economic model of a man as an egoistic agent. Experimental studies of trust often employ the "trust game", where one player passes some of her money to the other, hoping that the latter will send something back. This paper investigates the influence of players' expectations on their decision to trust their partner in a modified version of the trust game. We find that many players were too "optimistic" towards their partner, believing her to be more trustworthy than the average player. This "optimism" was significantly positively correlated with trust. Our results also suggest that trust is positively correlated with expectations about other players' trust: players who trusted their partners also thought that trusting behavior was more prevalent in the population.

Suggested Citation

  • Avtonomov, Y. & Elizarova, E., 2016. "Trust, Expectations and Optimism Bias: an Experimental Study," Journal of the New Economic Association, New Economic Association, vol. 29(1), pages 27-53.
    • Handle: RePEc:nea:journl:y:2016:i:29:p:27-53
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    trust; trustworthiness; expectations; experiment; optimism;
    All these keywords.

    JEL classification:

    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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