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a x 1
2 kax d
1
2
s:t: x; y
e
a 0; 1 : 2
In the above equation, y
e
represents the share of the amount received by the trustee that
he or she has to send back to the trustor such that their final payoffs are equalised. In other
words, y
e
is the maximum share of the received amount that a maximally inequity-averse
trustee would send back to the sender. We can see that, given that (x 1) is non-positive, y
e
is increasing in x,
By
e
Bx
2 kax d a x 1 2ka
4 kax d
2
s:t: x; y
e
a 0; 1 : 3
Eq. (2) also implies that y
e
takes a maximum value of 1/2 when x is equal to 1, that is,
when the sender fully trusts the recipient. Assuming that x and y
e
can take any value in the
interval [0,1], though this is not the case in practice, Fig. 5 graphs a comparison between the
trustworthiness and the equal division conditions for the Trust Game conducted in Glaeser et
al. (2000). For each amount sent, the two lines represent the return ratio (the ratio between the
amount returned and the amount sent) that satisfies either the trustworthiness condition or the
equal division condition. The trustworthy return ratio is equal to 1, regardless of the amount
sent. Indeed, for a trustee to be trustworthy, it is required that he should send back to the
trustor as much as the trustor had sent forward. On the contrary, the equal division return ratio
clearly depends on the amount sent. The equal division return ratio is equal to 0 for values of
the amount sent equal or below $5. Indeed, when a sender sends $5, he or she keeps $10.
Hence a maximally inequality averse recipient receiving twice the amount sent (twice $5, in
this case) would send back $0 to generate payoffs equality ($10, $10). For values above $5,
the larger the amount sent, the larger is the equal division return ratio, although the latter
increases at a decreasing rate. Finally, when the sender fully trusts the recipient (i.e., when the
amount sent is equal to $15) the equal division condition coincides with the trustworthiness
condition.
E. Ciriolo / European Journal of Political Economy 23 (2007) 10071024 1015
In monetary terms, condition (2) implies that the amount returned leading to equal final
payoffs is AR
e
=y
e
(kax +d), that is:
AR
e
1
2
k 1 ax a d; AR
e
z0; s:t: xa 0; 1 : 4
For values of AR larger than 0, AR
e
has a slope equal to 3/2 in the game of Glaeser et al.
(2000) and equal to 2 in the game of Berg et al. (1995), because of k being equal to 2 and 3,
respectively. Moreover, as recipients cannot send back negative values (i.e., cannot punish
untrusting senders), we will assume that the amount returned is equal to zero whenever AR
e
b0.
Another simple but interesting graphical representation of the equal division behavioural
norm is in Fig. 6. Here, with the intent of a more precise classification of trustees responses, we
add the equal division line derived above (i.e., AR
e
) alongside the trustworthiness line. It seems
that the equal division line strikingly fits a number of observations in the region below the
trustworthiness line. In particular, ignoring the four observations falling on the point ($0, $0),
and bearing in mind that trustees can only send back integer amounts of money, we find 12
observations in the region on and above the equal division line and below the trustworthiness
line.
7
This corresponds to 12.9% (12 out of 93) of the whole sample. Furthermore, and given that
the two conditions are equivalent at the point ($15, $15), if we admit that half of the trustees
replies falling on this point (hence 22 out of 44) are motivated by equity concerns, the
percentage of trustees adopting an equal division behavioural norm rises to 36.6% (34 out of 93).
Finally, when we only look at the region of the graph below the trustworthiness line, we find that
46% (12 out of 26) of the untrustworthy trustees responses in fact satisfy the equal division
condition.
Fig. 5. Amount sent and return ratio. Glaeser et al. (2000).
7
When the trustor sends $0 to the trustee, the latter cannot take any action at all.
E. Ciriolo / European Journal of Political Economy 23 (2007) 10071024 1016
These findings have significant implications. In effect, if we accept the idea whereby
individuals do care about equity and might take equity considerations into account in their
decision to reciprocate, ignoring the equal division condition in the analysis of the Trust Game
results constitutes a serious flaw. In fact, if rather than accepting that the equal division may be a
sufficient condition for trustworthiness, we exclude this possibility, limiting it to trustworthy
responses (on and above the trustworthiness line), we would overestimate unconditional
untrustworthiness by 86%.
8
As a consequence, in those studiessuch as Glaeser et al. (2000)
adopting the trustworthiness line as a lower bound for trustees trustworthiness, the identification
of the socio-demographic determinants appears substantially compromised.
9
Fig. 7 shows the incorporation of the equal division constraint in the experiment conducted
by Berg et al. (1995). The only difference with respect to the above analysis is that, in this case,
we have two possible equity division lines, depending on whether the recipient takes into
account the show-up fee in the decision to send back a share of the tripled amount received.
Indeed, it is possible that some binequity-averseQ trustees, in choosing the amount to send back,
8
In fact, we would erroneously include in the objectively buntrustworthyQ trusteesT responses (14), 12 additional replies
that do indeed meet a weaker constraint of trustworthiness. Therefore, we would overestimate 14 by 12/14 (i.e., by 86%).
Fig. 6. Trust game results, including the bEqual DivisionQ condition. Glaeser et al. (2000).
9
Incidentally, in the experiment conducted by Glaeser et al., biased results may also be the effect of the inclusion of 6
influential observations ($15, $30) in which the sender is fully trusting and the recipient is fully altruistic. It appears to us
that this aberrant behaviour is the result of a non-random pairing procedure. Our view is that those 6 recipients are
indeed people that, because of a special relationship (e.g., they might be partners, brothers, cousins, very close friends,
etc.), might have decided to send everything (forward to the recipient, and back to the sender). This choice, in turn, may
allow the recipient to show his or her spirit of abnegation (readiness to forgo everything for friendship or love, for
example) though it does not necessarily have any actual financial consequences. Indeed, just because of the assumed
relationship linking each of these pairs, sender and recipient might decide to spend the total payoff to go for dinner or
bowling together. In this way, sender and recipient would evenly share the total payoff, though this would occur outside
the game context. Therefore, there is reason to believe that Glaesers analysis should be conducted after prior removal of
these influential observations that clearly bias the results. Finally, the absence of anonymity between players introduces
the problem of selection bias in the analysis of trustees responses, as the most untrustworthy are logically removed from
the sample (Karlan, 2005).
E. Ciriolo / European Journal of Political Economy 23 (2007) 10071024 1017
disregard their own show-up fee because they literally interpreted the instructions received and
pocketed it.
Finally, the last row of Table 1 provides an outcome-based measure of the proportion of
trustees adopting the equal division (or conditional trustworthiness) behavioural norm for the
Trust Games in Berg et al. (1995) and in Glaeser et al. (2000). From an outcome-based
perspective, a significant proportion of trustees, more than a third, adopt this behavioural rule.
Moreover, notwithstanding the crucial differences in the procedure and in the structure of the
two games, the percentage of conditionally trustworthy trustees is exactly the same. Future
research may shed light on whether this finding constitutes an exception or is rather a general
feature of such games.
There are at least two major implications of incorporating the equity division behavioural
norm into the Trust Game. First, as we have just seen, equal division of final payoffs expands the
room for trustworthiness behind the stricter trustworthiness constraint. Secondly, if we accept
that equity concerns play such a significant role in determining trustees choices, then it is clear
that the relative size of show-up fees plays an equally important role. To see this more clearly, we
express Eq. (2) in terms of (a/d), that is, in terms of the ratio between the senders and the
recipients show-up fees:
y
e
a=d
x 1
2kx d=a
1
2
s:t: x; y
e
a 0; 1 : 5
Given that (x 1) is non-positive, the larger is (a/d)or, equivalently the smaller (d/a)the larger
is the negative effect on y
e
of an unequal initial allocation. Vice versa, an increase in (d/a) has a
non-negative effect on y
e
:
By
e
B d=a
2 x 1
4kx d=a
z0 s:t: x; y
e
a 0; 1 : 6
This implies that the larger is a compared to d, the lower is the share of the amount received
that an equity-concerned trustworthy trustee would be willing to send back. With reference to
Fig. 7. Trust game results, including the bEqual DivisionQ condition. Berg et al. (1995), whole sample.
E. Ciriolo / European Journal of Political Economy 23 (2007) 10071024 1018
Eq. (4), it is evident that the slope of the equal division condition (above AR
e
=0) is determined
by k for any value of ax. On the other hand, the intercept, (a +d) / 2, negatively depends on a
and positively on d.
Fig. 8 provides a graphical representation of trustees replies. With reference to the
experiment of Glaeser et al. (2000), the feasibility space of the Trust Game is subdivided into
three areas, baltruismQ, bconditional trustworthinessQ and bunconditional untrustworthinessQ,
depending on the minimum constraint satisfied by the recipients choice. This representation is
also useful for understanding the result obtained in Eq. (6). An increase in (a/d), that is, a
distribution of show-up fees more in favour of the sender, corresponds to a downward shift of the
equal division line, AR
e
. This, in turn, increases the probability of a lower response by an equity-
adverse trustee for each amount sent. Therefore there seem to be two countervailing factors, one
favouring cooperation and the other discouraging it, with a resulting ambiguity as to which
prevails. An increase in a relative to d implies that:
1. The sender has a higher amount to send forward to the recipient;
2. The recipient, however, has a relatively lower show-up fee, hence (s)he might be more
concerned about equality of final payoffs;
3. The sender, by backward induction, might anticipate the trustees deeper equity concern and
might decide to trust the recipient even less;
4. Finally, the recipient, receiving a lower amount of trust, is probably less prone to reciprocate
relative to a situation characterised by equal show-up fees.
Hence, it is still not evident whether an unequal distribution of show-up fees deters trustors
from placing trust and eventually reduces the incentive to cooperate for both players. It would be
interesting to conduct experiments to test for the significance of the relative stake size on the
level of trust placed by trustors, on the level of reciprocity displayed by trustees, and, overall, on
cooperation altogether. In this regard, Johansson-Stenman et al. (2005) find that the proportion
Fig. 8. Trust game, classification of trustees response. Glaeser et al. (2000).
E. Ciriolo / European Journal of Political Economy 23 (2007) 10071024 1019
of money sent by the trustor decreases significantly with the stake size. However, it is still not
clear whether the larger stake spurs selfishness feelings or simply introduces too high a risk in
the gamble to be played (a risk that may be exacerbated by the trustees recognition of inequality
treatment). Similarly, Anderson et al. (2004, p. 373) find, in analysing contribution in public-
good experiments, that bthe treatment effect of inequality reduces contributions by all members
of the affected group, regardless of their relative standing within the fixed payment distributionQ.
The effect of inequality aversion on trust and trustworthiness suggests that the debate on the
link between social capital and egalitarian policies should be renewed. The path-dependency
theories put forward by Putnam et al. (1993) could certainly explain the relative backwardness of
certain regions or countries with respect to others. However, the same theory cannot account for
the decline in the general level of trust that appears to have occurred in the United States and
other high-income countries during the last 40 years. Our result, along with the observation that
some countries with the highest average level of self-reported trustNorway, Sweden, Finland,
Canadaare characterised by progressive policies and a relatively even distribution of wealth,
may shed light on the temporal dynamics of trust and, indirectly, on social capital. If our analysis
provides support for the explanatory power of the equal division behavioural rule on
trustworthiness (fraction returned) and, by backward induction, on trust (amount sent), it
follows that econometric studies cannot neglect the role of inequality in the analysis of the
macro-determinants of self-reported trust.
Indeed, the bWhyQ section of Putnam (2000) devotes only 2 out of 100 pages to bpressure of
moneyQ, and only in referring to the financial vulnerability of individual families. Putnam
accounts for the social changes taking place in the US by mentioning a number of factors
(pressures of time and money, mobility and sprawl, technology and mass media) but no role is
given to wealth inequality and to the abandonment of egalitarian policies.
4. On the design of the trust game
I have suggested that the equal division condition can explain a higher proportion of trustees
replies, and can be a reason for the puzzling results related to trust and trustworthiness obtained
in the experimental economics literature. Besides the shortcomings of neglecting such a
behavioural norm, it is also debatable whether the Trust Game reflects actual relations of trust.
The design of the game may indeed have a significant impact on experimental results. The Trust
Game was designed to reproduce a situation in which cooperation enhances efficiency. Hence, in
Berg et al. (1995), the experimenter triples the amount sent by the sender so as to create a higher
total outcome than if trust and reciprocity were absent. However, in the standard version of the
game, the preferred social outcome depends solely on the amount of trust placed by the trustor.
10
This implies that, if the trustor places full trust on the trustee, the social outcome of the
transaction will improve, regardless of the trustees actual behaviour. This game structure may be
sufficient to reproduce, in a laboratory setting, one-off interactions where, as stated by Fehr and
Rockenbach (2003, p. 138), bthe trustee has superior productive opportunities for the use of
economic resourcesQ. Still, there are three major reasons why the standard design of the trust
game does not correspond to all other relations of trust. First of all, if the Trust Game is to
provide any useful information on trustworthiness and cooperative behaviour other than
10
Trust games where a better social outcome depends only on trust, and not on the combination of trust and reciprocity,
can be found, for example, in Bohnet and Zeckhauser (2004), Burks et al. (2003), Guerra and Zizzo (2004), and McCabe
et al. (2003).
E. Ciriolo / European Journal of Political Economy 23 (2007) 10071024 1020
producing experimental data on trusting attitudes, it should incorporate the dynamic aspect of a
trust relation.
11
This implies a repeated game and/or designing the game in such a way as to
make the additional outcomebrought about by cooperationdependent on both trust and
reciprocity. Secondly, the standard version of the Trust Game introduces a perverse effect given
that, when the experimenter multiplies by k the amount sent by the trustor, the trustee has indeed
a higher incentive to defect as he would earn k times the amount sent. This is not a negligible
effect as peoples stance towards fairness, and reciprocity seems to depend on the overall stake.
Rabin (1993, p. 1284) claims that bpeople will not be as willing to sacrifice a great amount of
money to maintain fairness as they would be with small amounts of money.Q This suggests that,
when the profitability of defecting is high (as in the standard version of the trust game), people
are more tempted to pursue their self-interest at the expense of reciprocity.
12
Finally, the Trust
Game is amenable to a sociological interpretation of its results (for example, many studies draw
conclusions on how trust and trustworthiness vary by gender, professional status, race,
nationality, etc.). Still, to the extent to which the choices taken in the Trust Game depend on the
past (reflect a subjects past experience of similar interactions, deep-rooted beliefs, and
behavioural norms), the game implies an evolutionary perspective. In a repeated Trust Game,
and under an evolutionary perspective, a trustee acting according to the equal division
behavioural norm signals a propensity to cooperate at least as high as a trustworthy trustees.
Indeed, in the game of Glaeser et al. (2000), the two constraints coincide when the trustor is fully
trusting. This implies that in a repeated setting, should the trustor believe that the trustee will
abide by the behavioural norm of the first interaction, he or she is better off placing total trust on
the trustee, regardless of whether the trustor has been matched to a trustworthy trustee or to a
trustee adopting the equal division behavioural norm. In fact, in placing full trust regardless of
the trustee type, the trustor could expect maximum cooperation and therefore obtain the
maximum payoff. This point stands out even more in a repetition of the game in Berg et al.
(1995). Then, a utility-maximising trustor who believes that the trustee will adhere to the
behavioural norm adopted in the first interaction would have a greater incentive to place trust in
the trustee satisfying the equal division condition. This is particularly clear if we look at Fig. 7,
where the trustworthiness and the equal division lines intersect at the point where the amount
sent equals $5. For larger amounts, a trustworthy trustee would behave in such a way as not to
make the trustor worse off, even when the trustor is fully trusting. On the contrary, for amounts
sent above $5, a trustee satisfying the equal division condition would make the trustor better off
(as he would receive more than he had sent to the trustee). Therefore the latter trustee is
particularly worth of trust.
This conclusion merits a detailed analysis aimed at gauging the relative capabilities of the two
conditions (trustworthiness and equal division) in giving rise to an evolutionary stable
equilibrium.
13
My feeling is that, with specific reference to the game in Berg et al. (1995),
even assuming that the trustee will always pocket his or her show-up fee, the repeated interaction
with a trustee following the equity condition is more likely to produce an evolutionary stable
equilibrium with full trust and full conditional trustworthiness. Indeed, should the trustor, by
accident or just to experiment to see what will happen, change his strategydeciding not to place
11
Indeed, as Gachter et al. (2004, p. 506) highlighted, bmost papers concentrate much more on trust than on
cooperationQ.
12
Under this perspective, experiments such those conducted by Johansson-Stenman et al. (2005), where the authors test
for the impact of stake size in trust games, are of great interest.
13
Skyrms (2004) is an excellent study of social interactions under the evolutionary perspective.
E. Ciriolo / European Journal of Political Economy 23 (2007) 10071024 1021
any trust and hence ensuring $10he would still have an incentive to return to his previous
strategy (as he could earn $15, though risking the trustees defection). On the contrary, the
repeated interaction between a trustor and a trustworthy trustee may well lead the couple to
spend some time in the equilibrium (full trust, full trustworthiness) but there may eventually be a
switch to the risk-dominant equilibrium (no trust, no action), since, in such a situation, an
untrusting trustor runs no riskthe trustee not being able to take any actionand does not forgo
any additional payoff (he would earn $10 either placing full trust or not placing trust at all).
5. Conclusions
Conventional economic theory is based on behavioural rules of pure self-interest. However,
experimental evidence shows that economic agents choices are affected by behavioural rules
such as altruism, trust, reciprocity and so on. Experimental economics is thereby providing an
invaluable contribution in filling the gap between the assumptions of neoclassical theory and the
motives underlying actual behaviour. At the same time, economic scholars are attempting to
identify a common pattern in the disjoint and somewhat conflicting empirical evidence (among
others, Rabin, 1993; Fehr and Schmidt, 1999; Bolton and Ockenfels, 2000) and to identify a
unifying model that can account for the different motives behind individual behaviour. The ideas
developed in the theory have however not always been used in interpretation of outcomes of
empirical games. In particular, in the Trust Game, the trustees replies falling below the
trustworthiness line cannot be dismissed as non-cooperative behaviour as, from an outcome-
based perspective, they may satisfy the equal division condition. This condition represents
another certainly weaker but non-negligible moral norm. Neglecting the equal division
behavioural norm, in the statistical analysis of the amount returned by the recipient, leads to
an overestimation of unconditional untrustworthiness. From the analysis of the extensive form of
the Trust Game, I solved the final payoffs of trustor and trustee for equality and obtain a measure
of the recipients conditional trustworthiness. This constitutes a weaker condition of
trustworthiness and assumes that trustworthy reciprocity may occur even when the amount
sent back by the trustee is strictly smaller than the amount that the trustor had sent forward, as
long as it satisfies the equal division condition. Yet, although controlling for equity concerns in
the statistical analysis of the amount returned by the recipient seems to be logical, relevant and in
line with the theory of equity and reciprocity, empirical analysis has not followed this path
(though Cox (2004) is an important step in this direction). One reason behind this reticence is
probably to be found in the empirical difficulty of a more complex analysis.
Finally, taking an outcome-based perspective, I found that a high proportion of trustees adopt
the equal division behavioural norm. I have also suggested that an unequal distribution of show-
up fees may deter trustors from placing trust, and may eventually reduce the incentive to
cooperate for both the trustor and the trustee. Consequently increasing income inequality may
underlie declines in the level of self-reported trust in high-income countries.
Acknowledgements
I thank Henry Capron, Georg Kirchsteiger and Jacques Thisse for useful conversations. I have
also benefited from the comments of seminar participants at Warwick University and at the
January 2005 Jamboree Enter Network (Free University of Brussels). My special thanks go to
Arye L. Hillman and three anonymous referees who all provided very helpful suggestions and
comments. I am indebted to S. Glaeser and J. Berg for allowing me to share their experimental
E. Ciriolo / European Journal of Political Economy 23 (2007) 10071024 1022
data. Financial support by the Belgian National Science Foundation (Project No. 2.4577.03) is
gratefully acknowledged.
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