Deciding to Distrust

Abstract

We employ experiments to illustrate one factor contributing to the lack of distrust in the recent corporate scandals: Trust rather than no trust was the default. Holding the expected returns from trusting constant, people are more trusting when the default is trust than when it is no trust. In a new game, the Distrust Game (DTG), where the default is full trust, trust levels are higher and trustworthiness levels lower than in the BDM-Trust Game (TG), where the default is no trust. Agents punish distrust more in the DTG than in the TG but principals do not anticipate this.

Keywords: Trust, reciprocity, framing, experiments, Economics - Microeconomics, Leadership/Conflict Management

JEL Classification: C72, C91