Does Trust Create Trust? A Further Experimental Evidence from an Extra-Laboratory Investment Game

This paper falls under the conceptual framework of social dilemmas in understanding and interpreting ethical choices commonly found in studies examining value and decision-making, such as in economics and finance. In the paper, special attention is paid to the Investment Game which is a stylised social dilemma game according to which Player A (i.e., the lender or trustor) may take a costly action – and hence possibly construable as an investment – that may generate social returns, while Player B (i.e., the borrower or trustee) may decide how to distribute the proceeds between herself/himself and the Player A. Experimental works on Trust and Investment Games showed systematic and reliable patterns of inconsistency concerning the standard equilibrium prediction underlying the assumption of complete information on selfish preferences. Along these lines, we outline in broad terms what is intended as social dilemmas; then, we shift the psychological framework of social dilemmas to experimental economics and modern behavioural economics. Finally, we conduct an Investment Game in the context of an extra-lab experiment, calculating two indices, namely, the propensity-to-trust index and the reciprocity index, for twenty-nine pairs of subjects randomly assigned to one of the two groups of subjects concerned. In finding components of trust and reciprocation, we can confirm expectations that a cooperative approach would lead to trusting and trustworthy behaviour, whereas a competitive approach makes experimental subjects behave suspiciously and untrustworthy. This should come as no surprise since components of trust are economic ‘primitives’ and, thus, relevant to every economic transaction. Accordingly, we study the basic empirical structure of social relations and associations emerging from experimental data, which may be expressed in network form. By using the concept of networks in the analysis of social behaviour, social network analysis is performed both to better understand the interactions between the two types of players involved through their decisions, and to gauge levels of trust and reciprocity.