Building Trust by Starting Small: A Behavioral Economics Analysis

Although often taken for granted or overlooked, trust is an integral component of every interaction or relationship. Obviously, a healthy society commands a significant degree of trust in its institutions. With the current spate of accounting and insider trading scandals, trust in our economic institutions is perhaps at its lowest level in the history of the United States. James Andreoni and Larry Samuelson of the University of Wisconsin are examining the nature of trust in order to see if institutions could possibly build social capital and a culture of trust. They hypothesize that trust is most effectively gained in interactions that begin with small stakes that gradually increase as each task or transaction is completed satisfactorily. If the initial stakes are small, people can explore the trustworthiness of others with little risk. Through a series of behavioral game theory and economic laboratory experiments, they will examine building trust in a single relationship, building trust between members of larger groups, and building trust in groups as a whole. To connect these experiments to the real world, the investigators will collect demographic, sociological, psychological and economic data on their subjects, including questions on their attributes, attitudes, and experiences, allowing them to explore the links between personal characteristics and behavior. The results of the experiments will be published in a series of articles.