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Investment Choice Architecture in Trust Games: When “All-in” Is Not Enough

Author

Listed:
  • Joaquín Gómez-Miñambres

    (Lafayette College, Department of Economics
    Economic Science Institute, Chapman University)

  • Eric Schniter

    (Economic Science Institute, Chapman University
    Argyros School of Business and Economics, Chapman University)

  • Timothy W. Shields

    (Economic Science Institute, Chapman University
    Argyros School of Business and Economics, Chapman University)

Abstract

While many economic interactions feature “All-or-Nothing” options nudging investors towards going “all-in”, such designs may unintentionally affect reciprocity. We manipulate the investor’s action space in two versions of the “trust game”. In one version investors can invest either “all” their endowment or “nothing”. In the other version, they can invest any amount of the endowment. Consistent with our intentions-based model, we show that "all-or-nothing” designs coax more investment but limit investors’ demonstrability of intended trust. As a result, “all-in” investors are less generously reciprocated than when they can invest any amount, where full investments are a clearer signal of trustworthiness.

Suggested Citation

  • Joaquín Gómez-Miñambres & Eric Schniter & Timothy W. Shields, 2019. "Investment Choice Architecture in Trust Games: When “All-in” Is Not Enough," Working Papers 19-24, Chapman University, Economic Science Institute.
    • Handle: RePEc:chu:wpaper:19-24
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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