Trust as a decision under ambiguity
Decisions to trust in strategic situations involve ambiguity (unknown probabilities). Despite many theoretical studies on ambiguity in game theory, empirical studies have lagged behind due to a lack of measurement methods, where separating ambiguity attitudes from beliefs is crucial. Baillon et al. (Econometrica, 2018b) introduced a method that allows for such a separation for individual choice. We extend this method to strategic situations and apply it to the trust game, providing new insights. People’s ambiguity attitudes and beliefs both matter for their trust decisions. People who are more ambiguity averse decide to trust less, and people with more optimistic beliefs about others’ trustworthiness decide to trust more. However, people who are more a-insensitive (insufficient discrimination between different likelihood levels) are less likely to act upon their beliefs. Our measurement of beliefs, free from contamination by ambiguity attitudes, shows that traditional introspective trust survey measures capture trust in the commonly accepted sense of belief in trustworthiness of others. Further, trustworthy people also decide to trust more due to their beliefs that others are similar to themselves. This paper shows that applications of ambiguity theories to game theory can bring useful new empirical insights.
|Keywords||Ambiguity, Belief measurement, Insensitivity, Strategic uncertainty, Trust|
|JEL||Noncooperative Games (jel C72), Laboratory, Individual Behavior (jel C91), Criteria for Decision-Making under Risk and Uncertainty (jel D81)|
|Persistent URL||dx.doi.org/10.1007/s10683-018-9582-3, hdl.handle.net/1765/109268|
Li, C, Turmunkh, U. (Uyanga), & Wakker, P.P. (2018). Trust as a decision under ambiguity. Experimental Economics, 1–25. doi:10.1007/s10683-018-9582-3