Question

The trust game is used in. experimental economics to examine both trust and trustworthiness. The game involves 2 people. A proposer is given $10 (or any sum of money) and asked how much they want to give to the responder. The key is that the amount of money given to the responder is tripled. Therefore, if the proposer sends $x they are left with $10–$x and the responder has$3x. Once the responder has the tripled sum of money, they get to decide how much of it they are willing to send back to the proposer.

a. The amount given by the proposer is generally viewed as a measure of trust. Do you agree or disagree with this view?Explain your answer.

b. The amount sent back to the proposer by the responder is generally seen as a measure of trustworthiness. Do you agree or disagree with this view? Explain your answer.

c. What is the standard economic (gametheory) prediction of the trust game?

Answer 1

a. Yes the amount given by the proposer is viewed as a measure of trust. This is because, the proposer is giving the money on risk to the responder, knowing the risk that he may not return the money and even the fact that the amount given will be tripled. In other words, the proposer trusted the responder by giving his share of money.

b. Yes the amount which will be sent back by the responder to the proposer will be seen as a measure of trustworthiness. Initially the proposer trusted the responder and gave him money without any condition, and now returning money back to the proposer would be keeping the trust of the proposer. Thus it is an act of trustworthiness.

c. The standard prediction of this game is that the first player will chose not to give any money to the second player and similarly the second player will also chose in his self interest not to give any money to the first player.