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Can Competition Spoil Reciprocity? - A Laboratory Experiment

Author

Listed:
  • Stefan Bauernschuster
  • Oliver Falck
  • Niels Große

Abstract

This paper investigates how group membership and competition among trustors interact with trust and trustworthiness in a laboratory one-shot trust game. To analyze these effects, we apply a 2x2 design. We induce group membership by letting subjects play coordination games with clear focal points, leading to higher investments and trustworthiness. Introducing competition leads to a decrease in trustworthiness, especially among partners. We argue that once competition comes into play, trustees perceive trustors’ investments as the outcomes of a competitive bidding process rather than good intentions, which reduces reciprocity.

Suggested Citation

  • Stefan Bauernschuster & Oliver Falck & Niels Große, 2010. "Can Competition Spoil Reciprocity? - A Laboratory Experiment," CESifo Working Paper Series 2923, CESifo.
    • Handle: RePEc:ces:ceswps:_2923
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    References listed on IDEAS

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    Cited by:

    1. Nese, Annamaria & O'Higgins, Niall & Sbriglia, Patrizia, 2023. "Reciprocity and Learning Effects in Price Competition," IZA Discussion Papers 16637, Institute of Labor Economics (IZA).
    2. Hellberg-Bahr, Anneke & Spiller, Achim, 2012. "How to Treat Farmers Fairly? Results of a Farmer Survey," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 15(3), pages 1-11, September.

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    More about this item

    Keywords

    trust; reciprocity; investment game; group membership; competition;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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