Trust, Risk and Betrayal

” But one price of engaging in consequential relationships at a distance is that one must choose to trust strangers.”

Think fiduciary relationships……

Abstract (Via Harvard)

Using experiments, we examine whether the decision to trust a stranger in a one-shot interaction is equivalent to taking a risky bet, or if a trust decision entails an additional risk premium to balance the costs of trust betrayal. We compare a binary-choice Trust game with a structurally identical, binary-choice Risky Dictator game offering a good or a bad outcome.We elicit individuals’ minimum acceptable probabilities (MAPs) of getting the good outcome such that they would prefer the gamble to the sure payoff. First movers state higher MAPs in the Trust game than in situations where nature determines the outcome.

Introduction (Via Harvard)

“It’s a vice to trust all, and equally a vice to trust none.” This sentiment from Seneca’s Letters to Lucilius inspired our research on when and whom to trust. Seneca, the great Roman first-century statesman and philosopher, recognized that trust always involves a gamble. Nineteen centuries later, playwright TennesseeWilliams noted the distinctive costs of betrayal: “We have to distrust each other. It’s our only defense against betrayal.” Today’s world of depersonalized investments and purchases by Internet enables us to secure great benefits from specialization, thus catering to particular preferences and providing diversification. But one price of engaging in consequential relationships at a distance is that one must choose to trust strangers. This paper analyzes experiments to determine whether the decision to trust a stranger in a one-shot interaction is equivalent to taking a risky bet, or if trust decisions entail an additional risk premium to balance the costs of trust betrayal.

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About Miguel Barbosa

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17. October 2009 by Miguel Barbosa
Categories: Curated Readings, Psychology & Sociology | Leave a comment

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