Social Norms, Information, and Trust among Strangers
How do norms of trust and reciprocity arise? We investigate this question by examining behavior in an experiment where subjects play a series of indefinitely repeated trust games. Players are randomly and anonymously matched each period. The parameters of the game are chosen to support trust and reciprocity as a sequential equilibrium when no reputational information is available. The main question addressed is whether a social norm of trust and reciprocity emerges under the most extreme information restriction (community-wide enforcement) or whether trust and reciprocity require additional, individual-specific information about a player's past history of play. In the absence of such reputational information, we find that a social norm of trust and reciprocity is difficult to sustain. The provision of reputational information on past individual decisions significantly increases trust and reciprocity when subjects have experienced the absence of such a mechanism. Importantly, we find that making reputational information available at a small cost may also lead to a significant improvement in trust and reciprocity, despite the fact that most subjects do not choose to purchase this information.
Social Norms, Trust Game, Random Matching, Trust and Reciprocity, Information, Reputational Information
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