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Belief-dependent Preferences and Reputation: Experimental Analysis of a Repeated Trust Game

Number: 622
Year: 2018
Author(s): Giuseppe Attanasi, Pierpaolo Battigalli, Elena Manzoni, Rosemarie Nagel
We study in a theoretical and experimental setting the interaction between belief-dependent preferences and reputation building in a finitely repeated trust game. We focus mainly on the effect of guilt aversion. In a simple two-types model, we analyze the effect of reputation building in presence of guilt-averse players and derive behavioral predictions. In the experiment, we elicit information on trustees' belief-dependent preferences and disclose it to the paired trustor before the repeated game. Our experimental results show that disclosing information on the trustee's belief-dependent preferences and thus letting players play the repeated trust game in presence of almost complete information leads to higher trust and cooperation than in the corresponding incomplete information game setting. In particular, disclosure of information on preferences of guilt-averse trustees also enhances the trustors'cooperation. Disclosure of information on belief-dependent preferences of reciprocity-concerned trustees, instead, does not lead to higher trust and cooperation. We show that this is theoretically consistent with subjects featuring low reciprocity concerns.

Keywords: Repeated psychological game; reputation; guilt; reciprocity; almost complete information
JEL codes: C72; C73; C91