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Sustaining Group Reputation

Author

Listed:
  • Erik O. Kimbrough

    (Simon Fraser University)

  • Jared Rubin

    (Chapman University)

Abstract

When individuals trade with strangers, there is a temptation to renege on contracts. In the absence of repeated interaction or exogenous enforcement mechanisms, this problem can impede valuable exchange. Historically, individuals have solved this problem by forming institutions that sustain trade using group, rather than individual, reputation. Groups can employ two mechanisms to uphold reputation that are generally unavailable to isolated individuals: information sharing and in-group punishment. In this paper, we design a laboratory experiment to distinguish the roles of these two mechanisms in sustaining group reputation and increasing gains from trade. We find that information sharing encourages path dependence via group reputation; good (bad) behavior by individuals results in greater (fewer) gains from exchange for the group in the future. However, the mere threat of in-group punishment is enough to discourage bad behavior, even if punishment is rarely employed. When combined, information sharing and in-group punishment work as complements; the presence of in-group punishment encourages cooperation early on, and information sharing reinforces this behavior over time.

Suggested Citation

  • Erik O. Kimbrough & Jared Rubin, 2013. "Sustaining Group Reputation," Working Papers 13-14, Chapman University, Economic Science Institute.
    • Handle: RePEc:chu:wpaper:13-14
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    File URL: http://www.chapman.edu/research-and-institutions/economic-science-institute/_files/WorkingPapers/rubin-sustaining-group-reputation.pdf
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    Cited by:

    1. Sascha Behnk & Iván Barreda-Tarrazona & Aurora García-Gallego, 2018. "Punishing liars—How monitoring affects honesty and trust," PLOS ONE, Public Library of Science, vol. 13(10), pages 1-30, October.
    2. Sascha Behnk & Iván Barreda-Tarrazona & Aurora García-Gallego, 2017. "An experimental test of reporting systems for deception," Working Papers 2017/11, Economics Department, Universitat Jaume I, Castellón (Spain).
    3. Aidin Hajikhameneh & Jared Rubin, 2019. "Exchange in the Absence of Legal Enforcement: Reputation and Multilateral Punishment under Uncertainty," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 35(1), pages 192-237.
    4. Pinghan Liang & Juanjuan Meng, 2023. "Paying it forward: an experimental study on social connections and indirect reciprocity," Review of Economic Design, Springer;Society for Economic Design, vol. 27(2), pages 387-417, June.
    5. Behnk, Sascha & Barreda-Tarrazona, Iván & García-Gallego, Aurora, 2019. "Deception and reputation – An experimental test of reporting systems," Journal of Economic Psychology, Elsevier, vol. 71(C), pages 37-58.
    6. Aidin Hajikhameneh & Erik O. Kimbrough, 2019. "Individualism, collectivism, and trade," Experimental Economics, Springer;Economic Science Association, vol. 22(2), pages 294-324, June.
    7. Sun, Huojun & Bigoni, Maria, 2018. "A fine rule from a brutish world? An experiment on endogenous punishment institution and trust," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 77(C), pages 158-169.
    8. Hajikhameneh, Aidin, 2024. "Reputation or court: Individualism, collectivism, and the choice of enforcement mechanism in exchange," Journal of Economic Behavior & Organization, Elsevier, vol. 217(C), pages 184-206.
    9. van den Akker, Olmo R. & van Assen, Marcel A.L.M. & van Vugt, Mark & Wicherts, Jelte M., 2020. "Sex differences in trust and trustworthiness: A meta-analysis of the trust game and the gift-exchange game," Journal of Economic Psychology, Elsevier, vol. 81(C).

    More about this item

    Keywords

    Experimental Economics; Group Reputation; Information; Group Punishment; Gains from Trade; Trust Game; Juries;
    All these keywords.

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation

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