Is strongtruststrong a risky decision - Rice University.pdfVIP

Journal of Economic Behavior Organization Vol. 55 (2004) 447–465 Is trust a risky decision? Catherine C. Eckela,∗, Rick K. Wilsonb,1 a Department of Economics, Virginia Polytechnic Institute, State University, Blacksburg, VA 24061, USA b Department of Political Science, Rice University, Houston, TX 77251, USA Available online 30 July 2004 Abstract In a series of laboratory experiments that focus on a two-person sequential, binary trust game, we examine the relationship between risk attitudes and the decision to trust an anonymous partner. Our experiments include two behavioral risk measures and one survey measure of risk attitudes in addition to the trust game. We find no statistical relationship between the behavioral risk measures and the decision to trust. With additional control variables, there is a weak relationship between risk measured from the survey and the decision to trust. © 2004 Elsevier B.V. All rights reserved. JEL classification: C9; D81; Z13 Keywords: Bargaining games; Trust; Risk aversion; Laboratory experiments 1. Introduction Is trust risky? In much research on trust, the decision by someone whether to trust another person is viewed as similar to placing a risky bet on the trustworthiness of an anonymous counterpart in a situation where both can gain from reciprocal exchange. This abstract setting captures important elements of trade between two anonymous persons where there are potential gains from trade, but in which there are incomplete property rights or in which contract enforcement is costly. The decision to trust is conceived to be a problem of one individual offering an asset to another but it is uncertain whether the value of the asset will be returned. For example, if an actor A makes a loan to actor B and