Trust and Truth

Abstract

In a laboratory experiment, we create relationships between pairs of anonymous subjects through a Prisoners' dilemma game. Thereafter the same subjects play a private values bargaining game with or without communication. Communication substantially increases bargaining efficiency among subjects who cooperated in the Prisoners' dilemma but has no significant effect on bargaining outcomes when one subject defected. Subjects who cooperated in the Prisoners' dilemma bid more aggressively if their opponent defected. Cooperators also lie more about their valuations when their opponent defected. The results constitute novel evidence that many people are strong reciprocators. Copyright © The Author(s). Journal compilation © Royal Economic Society 2009.

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