Intermediaries in Trust: Indirect Reciprocity, Incentives, and Norms

Any trust situation involves a certain amount of risk for trustors that trustees could abuse. In some cases, intermediaries exist who play a crucial role in the exchange by providing reputational information. To examine under what conditions intermediary opinion could have a positive impact on cooperation, we designed two experiments based on a modified version of the investment game where intermediaries rated the behaviour of trustees under various incentive schemes and different role structures. We found that intermediaries can increase trust if there is room for indirect reciprocity between the involved parties. We also found that the effect of monetary incentives and social norms cannot be clearly separable in these situations. If properly designed, monetary incentives for intermediaries can have a positive effect. On the one hand, when intermediary rewards are aligned with the trustor’s interest, investments and returns tend to increase. On the other hand, fixed monetary incentives perform less than any other incentive schemes and endogenous social norms in ensuring trust and fairness. These findings should make us reconsider the mantra of incentivization of social and public conventional policy.

[1]  Samer Faraj,et al.  The Role of Intermediaries in the Development of Trust on the WWW: The Use and Prominence of Trusted Third Parties and Privacy Statements , 2006, J. Comput. Mediat. Commun..

[2]  D. Ariely,et al.  Effort for Payment , 2004, Psychological science.

[3]  E. Shafir.  The Behavioral Foundations of Public Policy , 2013 .

[4]  Flaminio Squazzoni,et al.  Does incentive provision increase the quality of peer review? An experimental study , 2013 .

[5]  T. Cason,et al.  A Laboratory Study of Group Polarisation in the Team Dictator Game , 1997 .

[6]  Flaminio Squazzoni,et al.  Why Bother with What Others Tell You? An Experimental Data-Driven Agent-Based Model , 2010, J. Artif. Soc. Soc. Simul..

[7]  Roger Highfield,et al.  Super cooperators : evolution, altruism and human behaviour or why we need each other to succeed , 2011 .

[8]  R. D. Alexander.  The biology of moral systems , 1989 .

[9]  Yannis Bakos,et al.  An Exploratory Study of the Emerging Role of Electronic Intermediaries , 1997, Int. J. Electron. Commer..

[10]  Phu Nguyen Van,et al.  Trusting Behavior in a Repeated Investment Game , 2004 .

[11]  Flaminio Squazzoni,et al.  A social science-inspired complexity policy: Beyond the mantra of incentivization , 2014, Complex..

[12]  K. Cook,et al.  Cooperation Without Trust , 2005 .

[13]  V. Buskens,et al.  3. Rational Choice Research on Social Dilemmas: Embeddedness Effects on Trust , 2008 .

[14]  U. Fischbacher,et al.  The nature of human altruism , 2003, Nature.

[15]  P. Kollock.  SOCIAL DILEMMAS: The Anatomy of Cooperation , 1998 .

[16]  M. Bateson,et al.  Cues of being watched enhance cooperation in a real-world setting , 2006, Biology Letters.

[17]  R. Burt,et al.  Kinds of Third-Party Effects on Trust , 1995 .

[18]  U. Fischbacher.  z-Tree: Zurich toolbox for ready-made economic experiments , 1999 .

[19]  M. Rabin.  Published by: American , 2022 .

[20]  Joyce E. Berg,et al.  Trust, Reciprocity, and Social History , 1995 .

[21]  D. Ariely,et al.  Doing Good or Doing Well? Image Motivation and Monetary Incentives in Behaving Prosocially , 2007, SSRN Electronic Journal.

[22]  Flaminio Squazzoni,et al.  Reputational cues in repeated trust games , 2009 .

[23]  S. Kitayama,et al.  Minimal Social Cues in the Dictator Game , 2009 .

[24]  Gerhard G. van de Bunt,et al.  Learning to Trust: Networks Effects Through Time , 2009 .

[25]  J. Laffont,et al.  The Theory of Incentives: The Principal-Agent Model , 2001 .

[26]  M. Bacharach,et al.  Trust in signs. , 2001 .

[27]  Samuel Bowles,et al.  Economic incentives and social preferences: substitutes or complements? , 2012 .

[28]  Ingvild Almås,et al.  Fairness and the Development of Inequality Acceptance , 2010, Science.

[29]  E. Fehr.  A Theory of Fairness, Competition and Cooperation , 1998 .

[30]  Toby E. Stuart,et al.  Syndication Networks and the Spatial Distribution of Venture Capital Investments1 , 1999, American Journal of Sociology.

[31]  R. Hardin.  Trust and Trustworthiness , 2002 .

[32]  Alexandra A. Mislin,et al.  Trust games: A meta-analysis , 2011 .

[33]  B. Frey,et al.  Motivation Crowding Theory: A Survey of Empirical Evidence , 2000 .

[34]  Ben Greiner,et al.  An Online Recruitment System for Economic Experiments , 2004 .

[35]  Vincent Buskens,et al.  Trust in triads: An experimental study , 2010, Soc. Networks.

[36]  M A Nowak,et al.  The dynamics of indirect reciprocity. , 1998, Journal of theoretical biology.

[37]  K. Cook,et al.  Norms of cooperativeness and networks of trust. , 2001 .

[38]  Iris Bohnet,et al.  The sound of silence in prisoner's dilemma and dictator games , 1999 .

[39]  Samuel Bowles,et al.  Policies Designed for Self-Interested Citizens May Undermine "The Moral Sentiments": Evidence from Economic Experiments , 2008, Science.

[40]  T. Snijders.  Statistical Models for Social Networks , 2011 .

[41]  B. Frey,et al.  The Cost of Price Incentives: An Empirical Analysis of Motivation Crowding-Out , 1997 .

[42]  A. Schram,et al.  Social status and group norms: Indirect reciprocity in a repeated helping experiment , 2006 .

[43]  Claudia Keser,et al.  Experimental games for the design of reputation management systems , 2003, IBM Syst. J..

[44]  D. Fessler,et al.  Nobody's watching? Subtle cues affect generosity in an anonymous economic game. , 2005 .

[45]  J. Coleman.  Foundations of Social Theory , 1990 .