Is interpersonal trust derived from formal institutions or from social norms?

We plan to implement a lab-in-the-field trust experiment. Merchants and workers from informal commercial zones in La Paz (Bolivia) will be invited to play a modified version of the investment game (Berg et al 1995), i.e. they will be separated in two groups and one of them will be asked to give money or "invest in" the other at the promise they will return the investment with interests. We will use a factorial design with two treatment arms. The first treatment arm consists of revealing beforehand investors cannot appeal at all or can appeal to one of two institutions - formal or informal - if they believe investment returns were unfair. The second treatment arm models a “lax” or “severe” payment structure: appealing the results of the game can be either costly with high compensation, or cheap with low compensation. We test whether interpersonal trust changes by introducing each of these institutions and rules and comparing them. Then, we collect data on participants ’perceptions, risk aversion, loss aversion and local associations characteristics to explore if variables such as organizational capacity, the reputation of fair ruling and proximity are correlated with treatment effects.

2021-08-02

2021-10-29

interpersonal trust derived from trust in institutions

Interpersonal trust is measured by the amount an investor sends to the trustee, as in Berg et al (1995)

The experiment builds on the trust game designed by Berg et al. (1995), which will be implemented as a framed field experiment with an institutional variation treatment. This means we intend to implement the game in the natural working space of our study subjects: spaces available in merchants’ market zones. The experiment has a 3x2 between-subject factorial design. For the first treatment arm, we use the experiment of Berg et al. (1995) as a baseline treatment and then we test whether giving the opportunity to appeal the results of the game to a particular institution increases or decreases the level of trust, measured by the amount sent by the trustor. The institution can be formal, i.e. a commercial court, or informal, i.e. “tribunals of honor”. For the second treatment arm, we institute a “severe” and a “lax” treatment : appealing the results of the game can be either costly with a high compensation in case of a favorable ruling for the plaintiff, or cheap with a low compensation in case of a favorable ruling for the plaintiff. So, our experiment has five treatments in total: a control group, an informal institution with severe rulers, an informal institution with lax rules, a formal institution with severe rules and a formal institution with lax rules.

Our experimental procedure has two parts. First, subjects are submitted to specific rooms (room A and B) to play the modified trust game with institutions. Then, they are asked to fill out a small questionnaire after the experiment.

We consider Berg et al. (1995)’s trust game with initial endowments as baseline treatment, where two groups of agents are sent to two different rooms: A and B. The game proceeds as follows:

1. Subjects from room A (trustors) are given an amount Rwhereas subjects from room B (trustees) receive an amount S. Both subjects know each is receiving some amount of money at the beginning.
2. Subjects in A choose to send some, nothing or everything of it to subjects in room B (trustees).
3. We triple whatever amount subjects A sent and deliver it to subjects in room B.
4. Subjects in B choose to send: some, nothing or everything of the money they received from A.

The idea of giving an initial endowment to both players is to reduce the effect of aversion to inequality (Calabuig et. al. 2016).

There is no hidden information for this experiment.

Randomization will be done in site by a computer

Market merchants of the North Zone of La Paz city, Bolivia.

No

N/A

400 individuals

80 individuals per treatment

0.25 SD for each treatment. 0.95 Confidence level