On the Effect of Incentive Schemes on Trust and Trustworthiness

Abstract

We experimentally analyze whether being exposed to different incentive schemes induces subjects to change their behavior. In particular, we investigate the effect on trust and trustworthiness measured by conducting an investment game. We implement two simple incentive schemes modeling the basic characteristics of a cooperative incentive environment in which payoffs are based on a groups performance, as well as a competitive environment in which payoffs result from individuals relative performances. Our results indicate that trust and the expectation of trust are positively affected by being exposed to a team setting compared to a competitive tournament scheme.

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