European Business Schools Librarian's Group
ESSEC Working Papers,
ESSEC Research Center, ESSEC Business School
No DR 10007: Trust and Financial Trades: Lessons from an Investment Game Where Reciprocators Can Hide Behind Probabilities
Radu Vranceanu (), Angela Sutan () and Delphine Dubart ()
Additional contact information
Radu Vranceanu: ESSEC Business School, Postal: Avenue Bernard Hirsch - B.P. 50105, 95021 CERGY-PONTOISE Cedex, FRANCE
Angela Sutan: ESC Dijon Bourgogne, Postal: BP 50608, 21006 Dijon, FRANCE
Delphine Dubart: ESSEC Business School, Postal: Avenue Bernard Hirsch - B.P. 50105, 95021 CERGY-PONTOISE Cedex, FRANCE
Abstract: In this paper we show that if a very small, exogenously given probability of terminating the exchange is introduced in an elementary investment game, reciprocators play more often the defection strategy. Everything happens as if they "hide behind probabilities" in order to break the trust relationship. Investors do no not seem able to internalize the reciprocators' change in behavior. This could explain why trades involving an exogenous risk of value destruction, such as financial transactions, provide an unfavorable environment for trust-building
Keywords: Experimental Economics; Financial Transactions; Investment Game; Objective Risk; Trust
16 pages, May 2010
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