Strategic Trustworthiness via Non-Strategic Third-Party Reward – An Experiment

Abstract

In modern societies more and more people interact with strangers in one-shot situations. In these situations it might be difficult to trust others. Yet, trust is an essential component of most economic interactions. In this paper (in a one-shot situation) an impartial third party can reward another stranger for being trustworthy towards another unrelated person. By design the reward is costly and cannot be strategically motivated. Subjects strategically increase their trustworthiness towards others if they can anticipate to be rewarded for such behavior by an impartial third party. Impartial third parties reward trustworthiness irrespective of whether it can be anticipated.

Keywords: strong indirect reciprocity, third-party reward, trust game, norms, experiment

JEL Classification: C09, D03, D63