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Inequity aversion and trustees reciprocity

in the trust game

Emanuele Ciriolo
CORE, Universite Catholique de Louvain, Voie du Roman Pays 34, 1348 Louvain-la-Neuve, Belgium
DULBEA, Universite Libre de Bruxelles, Av. F.D. Roosevelt 50, CP 140, B-1050 Brussels, Belgium
Received 10 March 2005; received in revised form 23 October 2005; accepted 12 January 2006
Available online 23 March 2006
The introduction of inequity concerns into the Trust Game gives rise to complementary concepts of
conditional trustworthiness and unconditional untrustworthiness. When the inequity concern is not
accounted for, unconditional untrustworthiness is overestimated. The high proportion of trustees adopting
the equal division behavioural norm suggests that an unequal distribution of show-up fees may deter
trustors from placing trust, and may eventually reduce the incentive to cooperate for both players. It also
follows that increases in income inequality can explain declines in self-reported trust in high-income
D 2006 Elsevier B.V. All rights reserved.
JEL classification: C90; D63; Z13
Keywords: Trust game; Trustworthiness; Reciprocity; Inequality; Social capital
1. Introduction
Research on trust and cooperation has provided appealing, although controversial, concepts
for analysis of non-economic sources of socioeconomic development. Following the seminal
research of Coleman (1990), Putnam et al. (1993) and Fukuyama (1995), scholars have
empirically investigated primitives of social capital (for example Paldam and Svendsen, 2000).
In particular, differences in GDP growth across countries or regions have been explained using
0176-2680/$ - see front matter D 2006 Elsevier B.V. All rights reserved.
* CORE, Universite Catholique de Louvain, Voie du Roman Pays 34, 1348 Louvain-la-Neuve, Belgium. Tel.: +32 2
6504126; fax: +32 2 6503825.
E-mail address: eciriolo@ulb.ac.be.
European Journal of Political Economy 23 (2007) 10071024
survey measures that treat social capital on a par with more tangible physical and human capital
(see La Porta et al., 1997; Knack and Keefer, 1997; Zak and Knack, 2001; Beugelsdijk and van
Schaik, 2005). The results have been interpreted as demonstrating the thesis, put forward earlier
by Fukuyama (1995), that trust is a predictor of economic success. Non-economic factors in the
development process have thereby been given due emphasis.
Because of technical difficulties encountered in the empirical analysis of social capital (see
Durlauf, 2002b) and limited reliability of self-reported measures of trust, there has been a focus
on conclusions from economic experiments. It is claimed that bexperiments hold the promise of
constructing situations where questions of exchangeability and identification can be avoided via
the appropriate use of randomisationQ (Durlauf, 2002b, p. 475). Also, as explained by Carpenter
(2000), self-reported responses to survey questions are often biased. In particular, different types
of biases can affect attitudinal measures, including that respondents misperceive the abstract
situation described by the interviewer. Respondents, for example, tend to underestimate the
possible consequences of danger when this is hypothetical (hypothetical bias). In addition, they
often like to represent themselves more virtuous than they in fact are (idealised persona bias).
When incentives are an issue, survey responses may be unreliable when there is no stake in play
(lack of incentive compatibility).
The awareness of such sources of bias in survey measures has redirected attention from self-
reported measures of trust and cooperative behaviour to behavioural measures through design of
games, resembling real-life situations, not affected by the above sources of bias. The intention
has been to allow validation of survey results and the identification of possible determinants of
behaviour. However, the experimental approach may also produce misleading results or
outcomes that cannot be generalised. This limitation, mainly linked to experimental games
where subject pools are composed of undergraduate students, constitutes one of the main
critiques of behavioural economics, and suggests caution in interpreting experimental results.
Notwithstanding the drawbacks of the perspectives and the possibility of improving estimates
of trust by combining the two approaches, most empirical applications to trust rely exclusively
on survey data, generally drawn from the General Social Survey (GSS) or the World Value
Survey (WVS). The question used to obtain self-reported measures of trust is: bGenerally
speaking, would you say that most people can be trusted or that you cant be too careful in
dealing with people?Q The replies to this question, included in virtually all major international
surveys, are the object of a mounting body of research. Putnam (2000) has noted that, in the
United States, the proportion of people replying positively to this question has roughly halved
between 1960 and 1995 (see Fig. 1). If, as claimed by Durlauf (2002b, p. 475), bsocial capital
seems intrinsically tied-up with psychological notions such as trust, aspirations, and group
identificationQ, the evidence on generalised self-reported trust presented by Putnam has
implications for the study of social capital. In fact, although doubts have been cast on the
empirical validity of Putnams analysis (Durlauf, 2002a) and on indeed whether social capital
has decreased overtime, the decline of trust in survey measures is not a matter of contention.
In this regard, Fehr and Schmidt (2004) also show that, besides the age and the principal activity of the respondent,
students in economics and business administration tend to behave in a significantly different way than students in other
disciplines. See also Kirchgassner (2005).
Boggs (2001) focuses on the evidence on American civic (dis)engagement and is much less critical of Putnams
presentation of the temporal dynamics of self-reported trust measures. Paxton (1999, p. 123) finds a bstrong, consistent
decline in trust in individualsQ and affirms that this b(and its effects on social capital as the combination of trust and
associations) could have some potentially detrimental consequencesQ.
E. Ciriolo / European Journal of Political Economy 23 (2007) 10071024 1008
The attention paid to generalised self-reported trust is also consistent with Bjrnskov (2006),
who shows that trust is the component of social capital exerting the most significant effect on
The past-dependency theory (i.e., the idea that history matters) put forward by Putnam et al.
(1993) and shared by other scholars (see Platteau, 2000; Beugelsdijk and van Schaik, 2005) may
appear reasonable in explaining cross-sectional differences in the stock of social capital but
cannot explain a rise or decline in trust within the same country. The past-dependency thesis
needs to be complemented by a theory that can account for the differences observed across
countries as well as for changes taking place over time. Alesina and La Ferrara (2000, 2002), for
example, found that factors such as the increasing income, race and ethnic heterogeneity can
account for the decrease in the general level of self-reported trust. Putnams finding should be
interpreted with caution in the light of the above-mentioned bias characterising survey responses.
The question is whether there has been a decline in trust in the US or whether the result is the
consequence of an inherent bias in survey measures.
In this regard, Glaeser et al. (2000) have sought to test the reliability of self-reported
measures of trust and trustworthiness by conducting experiments with monetary rewards. By
collecting information on students playing the game, the authors could identify individual and
situational correlates of trust and trustworthiness. Even though not stated in their paper, their
approach is consistent with Granovetters observation that bstandard economic analysis
neglects the identity of past relations of individual transactors, but rational individuals know
better, relying on their knowledge of these relations. They are less interested in general
reputations than in whether a particular other may be expected to deal honestly with them
mainly a function of whether they or their own contacts have had satisfactory past dealings
with the otherQ (Granovetter, 1985, p. 491). Glaeser et al. (2000) implicitly share this view
and, with some minor changes, conduct the game designed by Berg et al. (1995) to test the
reliability of GSS attitudinal measures of trust and trustworthiness and to identify their
Fig. 1. Historical trend of self-reported trust, 19601999, US. Source: Putnam (2000).
E. Ciriolo / European Journal of Political Economy 23 (2007) 10071024 1009
They find no significant correlation between trusting attitudes and trusting
behaviour, that is, between survey responses on trust and the amounts transferred in the Trust
Game. This result has been confirmed by Burks et al. (2003), who extended the study of the
determinants of trusting behaviour using a bMach scaleQ, which is a social-psychological
measure of predisposition to opportunism in social interactions. Burks et al. (2003) find that the
Mach scale predicts distrust but not untrustworthy behaviour. Gunnthorsdottir et al. (2002), on
the other hand, provide contrary evidence for a negative correlation between the Mach score and
In summary, it seems that behavioural measures of trust and trustworthiness, as well as the
findings related to their determinants, are far from uniform. In this paper, I attempt to determine
the extent to which the Trust Game assists in studying trust and reciprocity in an investment
setting. Over the last decade, a number of applications of the Trust Game have tested hypotheses
relating to gender differences (Fershtman and Gneezy, 2001), ethnic and racial differences
(Bouckaert and Dhaene, 2004; Burks et al., 2003; Fershtman and Gneezy, 2001), beliefs
(Croson, 2000), intentions (McCabe et al., 2003), social distance (Buchan and Croson, 2004),
communication (Buchan et al., in press), and culture (Carpenter et al., 2004). Although this
literature provides interesting insights into the determinants of trust and cooperative behaviour,
some of the results appear puzzling. My intention is to explore the reasons behind such results.
In particular, I critically analyse the approach of Glaeser et al. (2000) and show that neglect of
the equal-division behavioural norm in the Trust Game can lead to underestimation of
respondents positive attitudes towards cooperation, and can play down the extent to which they
do reciprocate. This, in turn, can affect the reliability of the identification of the correlates of
Section 2 reviews the results of the experiments and gives a brief account of the usual
interpretation in the Trust Game. In Section 3, from the analysis of the extensive form of the
Trust Game, I derive an additional condition for trustworthiness. The final payoffs of trustor and
trustee are solved for equality, and a trustees behavioural norm of equal division or conditional
trustworthiness is derived. This is trustworthiness up to the point of equality between final
payoffs. That is, a minimum level of reciprocity may occur even when the amount sent back by
the trustee is strictly smaller than the amount sent forward by the trustor, as long as the bequal
divisionQ constraint is satisfied. Indeed, inequality-averse trustees do not reciprocate by equal
sharing but rather take into account, in their decision to reciprocate, the amount kept by the
trustor. This weaker definition of trustworthiness implies that the smaller is the amount sent
forward by the trustor (and the higher the portion of the stake kept by the trustor), the smaller is
the amount that a maximally inequality-averse trustee sends back. The new concept of
conditional trustworthiness explains a higher share of variability in the amount sent back. I also
consider the extent of the error when the results of the Trust Game are analysed ignoring this
weaker form of trustworthiness. Section 4 criticizes the interpretation of the standard version of
the Trust Game and claims that the standard version of the Trust Game may not represent actual
relations of trust. I also note concerns about the appropriateness of the design of the game.
Section 5 concludes.
As we will see in Section 2, the design of these two games differs in some respects. Whereas in the game of Berg et al.
(1995) the experimenter triples the amount sent from the trustor, in Glaeser et al. (2000) the same amount is doubled. In
addition, in the latter study, the authors randomly allow half of the potential trustees to make a promise of trustworthiness,
in the form of cheap-talk. Finally, in Berg et al. (1995) the trustee receives $10 as a show-up fee that he or she may decide
to include in the amount to be sent back.
E. Ciriolo / European Journal of Political Economy 23 (2007) 10071024 1010
2. The trust game: the standard approach
The experiment designed by Berg et al. (1995) reproduces an investment setting where
individual actual decisions can be compared to the theoretical prediction of neoclassical
economics. This allows gauging the extent of neoclassical-economics bindividualist biasQ, that is,
the degree to which, in practice, the postulates of rationality and self-interest do not explain
individual choices.
Fig. 2 shows the general extensive form of the experiment designed by Berg et al. (1995). We
will refer to this as the Trust Game. This game, in its original form, consisted of four steps:
1. Both the trustor and the trustee are given a $10 show-up fee. For practical reasons, we
indicate these as a and d respectively for the trustor and the trustee;
2. The trustor is then given the opportunity to send an integer portion, S
uax, of his $10 to the
trustee. Sending money to the recipient is obviously risky but, if the trustee does not break the
trust, the potential gain for the trustor is greater than $10;
3. The experimenter triples whatever amount the trustor decides to send to the trustee (in the
extended form of the game, this entails multiplication by a constant k =3). This step is
intended to create a social dilemma, that is, a situation where individual and group
incentives differ;
4. Finally, the trustee can choose to send back to the trustor an integer portion, S
uy(kax +d),
of the amount received by the experimenter. In making this choice, as we will see later, the
specific setting of the game requires the trustee to take or not to take into account his or her
show-up fee.
The Trust Game in Glaeser et al. (2000) differs slightly from the above. In fact:
(1) In Glaeser et al. (2000) the sender and the recipient meet. Therefore, contrary to Berg et al.
(1995), the game is not conducted in a double-blind procedure, where anonymity is indeed
guaranteed with respect to the other player as well as with respect to the experimenter;
(2) The trustor receives $15 rather than $10;
Fig. 2. Extensive form of the trust game.
E. Ciriolo / European Journal of Political Economy 23 (2007) 10071024 1011
(3) The trustee does not receive a show-up fee, hence d =0;
(4) Finally, the experimenter doubles (k =2), rather than triples (k =3), the amount sent by
the trustor. This difference has the aim of limiting the incentive to cooperate as in the
setting of the game carried out by Glaeser et al. (2000)where anonymity is not
guaranteedcooperation may anyway be encouraged by a past relationship or fear of
It is important to bear in mind that the unique Nash Equilibrium prediction for the Trust Game
is that the trustor should send nothing. Indeed, by backward induction, he or she knows that the
recipient, acting rationally, has no incentive to reciprocate. Still, results from the two
experiments above differ markedly from the theoretical predictions of the game. Figs. 3 and 4
show that this prediction is confirmed only 5 out of 60 times in Berg et al. (1995) and 4 out of 97
times in Glaeser et al. (2000).
How should these results be interpreted? Let us briefly first review the analytical
framework and definitions adopted in the past. The concepts of trust and trustworthiness of
Berg et al. (1995) and Glaeser et al. (2000) have a common theoretical justification and refer
to a definition proposed by Coleman (1990). In Foundations of Social Theory, Coleman
(1990, p. 98) proposes that, bif the trustee is trustworthy, the person who places trust is better
off than if trust were not placed, whereas if the trustee is not trustworthy, the trustor is worse
off than if trust were not placedQ. Analytically, the sender is said to be trusting or bto place a
trust on the recipientQ if and only if S
N0. On the other hand, the recipient is said to be
untrustworthy or not bto keep the trustQ if and only if S
. Figs. 3 and 4 show the results
obtained in the two Trust Games along with a graphical representation of the trustworthiness
Fig. 3. Relationship between the amount sent and the amount returned. Trust game, Berg et al. (1995), whole sample.
Indeed, both trustor and trustee receive a $10 show-up fee for taking part in two experimental games: the trust game
and the envelope game. This is paid a posteriori and may be interpreted as a fixed and equal reward for the time spent in
playing the two games and replying to a survey. Hence, the difference is that, in the specific framework of the trust game,
only the trustor receives an initial stake.
E. Ciriolo / European Journal of Political Economy 23 (2007) 10071024 1012
line. Points to the right of ($0, $0) denote trusting senders. On the other side, observations on
and above the trustworthiness line denote trustworthy trustees, whereas points below this line
denote untrustworthy trustees.
Trustworthiness is a stricter condition than reciprocity. In the Trust Game context, McCabe et
al. (2003) define positive reciprocity as bthe costly behaviour of the second mover that rewards a
first mover [. . .]Q. The study of reciprocity is generally done by referring to the return ratio or
fraction returned, S
/ (kS
). This implies that a fraction returned of 0.1 indicates some positive
reciprocity, though it may not meet the trustworthiness condition.
Now, taking this definition of trustworthiness as benchmark for a bnon-cheatingQ trustee, the
first part of Table 1 shows a very simple classification of trustees responses. As it would be
logical to expect, the percentage of untrustworthy trustees in Berg et al. (1995) is higher than in
Glaeser et al. (2000).
However, we should ask ourselves whether, by adopting Colemans
definition of trustworthiness, we obtain a reliable measure of reciprocity or, rather, whether the
trustworthiness condition is so strong that we are indeed underestimating trustees tendency to
All too often, in the context of the Trust Game (e.g., Bouckaert and Dhaene, 2004),
reciprocity is equated to trustworthiness and vice versa, ignoring the possibility that a reciprocal
pattern may arise conditionally to an equal division rule. This is the question addressed in the
next section.
3. Introducing the condition of equal division
In recent years there have been a number of attempts at incorporating fairness into game
theory and at accounting for the equity concern (Rabin, 1993; Dufwenberg and
Kirchsteiger, 2004; Fehr and Schmidt, 1999; Bolton and Ockenfels, 2000). These studies
are driven by the desire to develop a more realistic theoretical framework capable of
Fig. 4. Relationship between the amount sent and the amount returned. Trust game, Glaeser et al. (2000).
The double-blind procedure in Berg et al. (1995) excludes potential punishment threats and therefore should logically
provide disincentives for trustees to reciprocate.
E. Ciriolo / European Journal of Political Economy 23 (2007) 10071024 1013
accounting for preferences motivated by self-interest as well as by other-regarding
behavioural norms.
In fact, there are extensive accounts of situations in which people do not behave according
to the utility maximisation principle. In experimental economics games, subjects are often
found to exhibit social preferences, and to be concerned about social norms such as reciprocity
or fairness. For example, in a well-known experiment on food sharing, Yaari and Bar-Hillel
(1981) investigate the relative importance of Pareto efficiency and equity as principles adopted
in assessing a just distribution of goods. Though, in their experiment, subjects express
personal judgement on hypothetical circumstances, the authors found that a significant number
of replies are driven by equity considerations. Brosnan and de Waal (2003) conducted an
experiment with a nonhuman primate, the brown capuchin monkey, and show that, in
exchanges with a human experimenter, their subjects respond negatively to unequal reward
distribution. Brosnan and de Waal (2003, p. 297) justify their findings and attempt to
generalise validity by claiming that bduring the evolution of cooperation it may have become
critical for individuals to compare their own efforts and payoffs with those of others. Camerer
and Thaler (1995, p. 217), in their account of the importance of manners in explaining
ultimatum and dictator games outcomes, mention a study conducted by Murnighan and Saxon
(1994). The experimenters found that kindergartners playing ultimatum games behaved almost
like pure income maximisers, accepting minimal offers. Camerer and Thaler (1995) interpret
this result as evidence bthat perhaps the tendency to reject insulting low offers is learned, as
manners areQ.
We share this view and, in particular, we posit that trustworthy behaviour may be elicited
subject to the condition of equity being satisfied. Therefore, we introduce these equity
considerations in the interpretation of the results of the Trust Game. In practice, we suggest
In turn, the development of new models, with distributional concerns and intentionality motives, encourages the
design of new games aimed at testing the validity of theoretical models. For example, Bereby-Meyer and Niederle
(2005), in experiments conducted with special types of bargaining games, find that each theoretical model is able to
explain one specific result, but none is yet able to account for the variety of their experimental results.
Table 1
Analysis of trustees responses
Observations Percentages
Berg et al. Glaeser et al. Berg et al. Glaeser et al.
Trustworthy 7 51 12.7% 54.8%
More than trustworthy 24 16 43.6% 17.2%
Less than trustworthy 24 26 43.6% 28.0%
Total 55 93 100% 100%
Conditionally trustworthy
35.5% 35.5%
In the first part of the table, we provide an outcome-based classification of trustees replies, taking exclusively into
account the trustworthiness condition, hence neglecting the existence of the equity condition. On the other hand, at the
end of the table, we provide an outcome-based count of the trustees following the equity division behavioural rule. In
doing so, we pay attention at the fact that trustworthiness and equity conditions intersect.
Conditionally trustworthiness refers to trustee adopting the equal division behavioural norm.
In Berg et al. (1995), for a level of amount sent equal to $5, the lines of trustworthiness and of equal division coincide.
As a consequence, we assume that half of the 3 trustees sending back $5 follow the equal division behavioural norm.
Similarly, in Glaeser et al. (2000), for a level of amount sent equal to $15, the lines of trustworthiness and of equal
division coincide. Therefore we assume that half of the 44 trustees sending back $15 followed the equal division
behavioural norm.
E. Ciriolo / European Journal of Political Economy 23 (2007) 10071024 1014
that the bequality of final payoffsQ could rightly be considered as a sufficient condition for a
trustworthy trustee. After all, in Glaeser et al. (2000) as well as in Berg et al. (1995), there is
no previous agreement as to the minimal amount that the trustor expects to receive back from
the trustee (a procedure that, by the way, is introduced in Fehr and Rockenbach, 2003). In
both Glaeser et al. (2000) and Berg et al. (1995), no emphasis is placed on the material
attribution of $10 to the trustor but, in placing trust onto the trustee, the trustor does not
specify the bdesired amountQ (s)he would like to have sent back. So, in these settings, it is not
clear with respect to what, in particular, trustworthiness should be defined. In the absence of a
clearly defined reference value (as the one the trustor indicates in Fehr and Rockenbach,
2003), it seems advisable to adopt the less strict condition (hence, the bequal divisionQ) in
order not to underestimate willingness to cooperate.
To find a weaker condition for trustworthiness, we impose the equality of payoffs in the Trust
a 1 x y kax d 1 y kax d s:t: x; ya 0; 1 : 1
Solving for y, we obtain

a x 1
2 kax d

s:t: x; y
a 0; 1 : 2
In the above equation, y
represents the share of the amount received by the trustee that
he or she has to send back to the trustor such that their final payoffs are equalised. In other
words, y
is the maximum share of the received amount that a maximally inequity-averse
trustee would send back to the sender. We can see that, given that (x 1) is non-positive, y
is increasing in x,

2 kax d a x 1 2ka
4 kax d
s:t: x; y
a 0; 1 : 3
Eq. (2) also implies that y
takes a maximum value of 1/2 when x is equal to 1, that is,
when the sender fully trusts the recipient. Assuming that x and y
can take any value in the
interval [0,1], though this is not the case in practice, Fig. 5 graphs a comparison between the
trustworthiness and the equal division conditions for the Trust Game conducted in Glaeser et
al. (2000). For each amount sent, the two lines represent the return ratio (the ratio between the
amount returned and the amount sent) that satisfies either the trustworthiness condition or the
equal division condition. The trustworthy return ratio is equal to 1, regardless of the amount
sent. Indeed, for a trustee to be trustworthy, it is required that he should send back to the
trustor as much as the trustor had sent forward. On the contrary, the equal division return ratio
clearly depends on the amount sent. The equal division return ratio is equal to 0 for values of
the amount sent equal or below $5. Indeed, when a sender sends $5, he or she keeps $10.
Hence a maximally inequality averse recipient receiving twice the amount sent (twice $5, in
this case) would send back $0 to generate payoffs equality ($10, $10). For values above $5,
the larger the amount sent, the larger is the equal division return ratio, although the latter
increases at a decreasing rate. Finally, when the sender fully trusts the recipient (i.e., when the
amount sent is equal to $15) the equal division condition coincides with the trustworthiness
E. Ciriolo / European Journal of Political Economy 23 (2007) 10071024 1015
In monetary terms, condition (2) implies that the amount returned leading to equal final
payoffs is AR
(kax +d), that is:

k 1 ax a d; AR
z0; s:t: xa 0; 1 : 4
For values of AR larger than 0, AR
has a slope equal to 3/2 in the game of Glaeser et al.
(2000) and equal to 2 in the game of Berg et al. (1995), because of k being equal to 2 and 3,
respectively. Moreover, as recipients cannot send back negative values (i.e., cannot punish
untrusting senders), we will assume that the amount returned is equal to zero whenever AR
Another simple but interesting graphical representation of the equal division behavioural
norm is in Fig. 6. Here, with the intent of a more precise classification of trustees responses, we
add the equal division line derived above (i.e., AR
) alongside the trustworthiness line. It seems
that the equal division line strikingly fits a number of observations in the region below the
trustworthiness line. In particular, ignoring the four observations falling on the point ($0, $0),
and bearing in mind that trustees can only send back integer amounts of money, we find 12
observations in the region on and above the equal division line and below the trustworthiness
This corresponds to 12.9% (12 out of 93) of the whole sample. Furthermore, and given that
the two conditions are equivalent at the point ($15, $15), if we admit that half of the trustees
replies falling on this point (hence 22 out of 44) are motivated by equity concerns, the
percentage of trustees adopting an equal division behavioural norm rises to 36.6% (34 out of 93).
Finally, when we only look at the region of the graph below the trustworthiness line, we find that
46% (12 out of 26) of the untrustworthy trustees responses in fact satisfy the equal division
Fig. 5. Amount sent and return ratio. Glaeser et al. (2000).
When the trustor sends $0 to the trustee, the latter cannot take any action at all.
E. Ciriolo / European Journal of Political Economy 23 (2007) 10071024 1016
These findings have significant implications. In effect, if we accept the idea whereby
individuals do care about equity and might take equity considerations into account in their
decision to reciprocate, ignoring the equal division condition in the analysis of the Trust Game
results constitutes a serious flaw. In fact, if rather than accepting that the equal division may be a
sufficient condition for trustworthiness, we exclude this possibility, limiting it to trustworthy
responses (on and above the trustworthiness line), we would overestimate unconditional
untrustworthiness by 86%.
As a consequence, in those studiessuch as Glaeser et al. (2000)
adopting the trustworthiness line as a lower bound for trustees trustworthiness, the identification
of the socio-demographic determinants appears substantially compromised.
Fig. 7 shows the incorporation of the equal division constraint in the experiment conducted
by Berg et al. (1995). The only difference with respect to the above analysis is that, in this case,
we have two possible equity division lines, depending on whether the recipient takes into
account the show-up fee in the decision to send back a share of the tripled amount received.
Indeed, it is possible that some binequity-averseQ trustees, in choosing the amount to send back,
In fact, we would erroneously include in the objectively buntrustworthyQ trusteesT responses (14), 12 additional replies
that do indeed meet a weaker constraint of trustworthiness. Therefore, we would overestimate 14 by 12/14 (i.e., by 86%).
Fig. 6. Trust game results, including the bEqual DivisionQ condition. Glaeser et al. (2000).
Incidentally, in the experiment conducted by Glaeser et al., biased results may also be the effect of the inclusion of 6
influential observations ($15, $30) in which the sender is fully trusting and the recipient is fully altruistic. It appears to us
that this aberrant behaviour is the result of a non-random pairing procedure. Our view is that those 6 recipients are
indeed people that, because of a special relationship (e.g., they might be partners, brothers, cousins, very close friends,
etc.), might have decided to send everything (forward to the recipient, and back to the sender). This choice, in turn, may
allow the recipient to show his or her spirit of abnegation (readiness to forgo everything for friendship or love, for
example) though it does not necessarily have any actual financial consequences. Indeed, just because of the assumed
relationship linking each of these pairs, sender and recipient might decide to spend the total payoff to go for dinner or
bowling together. In this way, sender and recipient would evenly share the total payoff, though this would occur outside
the game context. Therefore, there is reason to believe that Glaesers analysis should be conducted after prior removal of
these influential observations that clearly bias the results. Finally, the absence of anonymity between players introduces
the problem of selection bias in the analysis of trustees responses, as the most untrustworthy are logically removed from
the sample (Karlan, 2005).
E. Ciriolo / European Journal of Political Economy 23 (2007) 10071024 1017
disregard their own show-up fee because they literally interpreted the instructions received and
pocketed it.
Finally, the last row of Table 1 provides an outcome-based measure of the proportion of
trustees adopting the equal division (or conditional trustworthiness) behavioural norm for the
Trust Games in Berg et al. (1995) and in Glaeser et al. (2000). From an outcome-based
perspective, a significant proportion of trustees, more than a third, adopt this behavioural rule.
Moreover, notwithstanding the crucial differences in the procedure and in the structure of the
two games, the percentage of conditionally trustworthy trustees is exactly the same. Future
research may shed light on whether this finding constitutes an exception or is rather a general
feature of such games.
There are at least two major implications of incorporating the equity division behavioural
norm into the Trust Game. First, as we have just seen, equal division of final payoffs expands the
room for trustworthiness behind the stricter trustworthiness constraint. Secondly, if we accept
that equity concerns play such a significant role in determining trustees choices, then it is clear
that the relative size of show-up fees plays an equally important role. To see this more clearly, we
express Eq. (2) in terms of (a/d), that is, in terms of the ratio between the senders and the
recipients show-up fees:
x 1
2kx d=a

s:t: x; y
a 0; 1 : 5
Given that (x 1) is non-positive, the larger is (a/d)or, equivalently the smaller (d/a)the larger
is the negative effect on y
of an unequal initial allocation. Vice versa, an increase in (d/a) has a
non-negative effect on y
B d=a

2 x 1
4kx d=a
z0 s:t: x; y
a 0; 1 : 6
This implies that the larger is a compared to d, the lower is the share of the amount received
that an equity-concerned trustworthy trustee would be willing to send back. With reference to
Fig. 7. Trust game results, including the bEqual DivisionQ condition. Berg et al. (1995), whole sample.
E. Ciriolo / European Journal of Political Economy 23 (2007) 10071024 1018
Eq. (4), it is evident that the slope of the equal division condition (above AR
=0) is determined
by k for any value of ax. On the other hand, the intercept, (a +d) / 2, negatively depends on a
and positively on d.
Fig. 8 provides a graphical representation of trustees replies. With reference to the
experiment of Glaeser et al. (2000), the feasibility space of the Trust Game is subdivided into
three areas, baltruismQ, bconditional trustworthinessQ and bunconditional untrustworthinessQ,
depending on the minimum constraint satisfied by the recipients choice. This representation is
also useful for understanding the result obtained in Eq. (6). An increase in (a/d), that is, a
distribution of show-up fees more in favour of the sender, corresponds to a downward shift of the
equal division line, AR
. This, in turn, increases the probability of a lower response by an equity-
adverse trustee for each amount sent. Therefore there seem to be two countervailing factors, one
favouring cooperation and the other discouraging it, with a resulting ambiguity as to which
prevails. An increase in a relative to d implies that:
1. The sender has a higher amount to send forward to the recipient;
2. The recipient, however, has a relatively lower show-up fee, hence (s)he might be more
concerned about equality of final payoffs;
3. The sender, by backward induction, might anticipate the trustees deeper equity concern and
might decide to trust the recipient even less;
4. Finally, the recipient, receiving a lower amount of trust, is probably less prone to reciprocate
relative to a situation characterised by equal show-up fees.
Hence, it is still not evident whether an unequal distribution of show-up fees deters trustors
from placing trust and eventually reduces the incentive to cooperate for both players. It would be
interesting to conduct experiments to test for the significance of the relative stake size on the
level of trust placed by trustors, on the level of reciprocity displayed by trustees, and, overall, on
cooperation altogether. In this regard, Johansson-Stenman et al. (2005) find that the proportion
Fig. 8. Trust game, classification of trustees response. Glaeser et al. (2000).
E. Ciriolo / European Journal of Political Economy 23 (2007) 10071024 1019
of money sent by the trustor decreases significantly with the stake size. However, it is still not
clear whether the larger stake spurs selfishness feelings or simply introduces too high a risk in
the gamble to be played (a risk that may be exacerbated by the trustees recognition of inequality
treatment). Similarly, Anderson et al. (2004, p. 373) find, in analysing contribution in public-
good experiments, that bthe treatment effect of inequality reduces contributions by all members
of the affected group, regardless of their relative standing within the fixed payment distributionQ.
The effect of inequality aversion on trust and trustworthiness suggests that the debate on the
link between social capital and egalitarian policies should be renewed. The path-dependency
theories put forward by Putnam et al. (1993) could certainly explain the relative backwardness of
certain regions or countries with respect to others. However, the same theory cannot account for
the decline in the general level of trust that appears to have occurred in the United States and
other high-income countries during the last 40 years. Our result, along with the observation that
some countries with the highest average level of self-reported trustNorway, Sweden, Finland,
Canadaare characterised by progressive policies and a relatively even distribution of wealth,
may shed light on the temporal dynamics of trust and, indirectly, on social capital. If our analysis
provides support for the explanatory power of the equal division behavioural rule on
trustworthiness (fraction returned) and, by backward induction, on trust (amount sent), it
follows that econometric studies cannot neglect the role of inequality in the analysis of the
macro-determinants of self-reported trust.
Indeed, the bWhyQ section of Putnam (2000) devotes only 2 out of 100 pages to bpressure of
moneyQ, and only in referring to the financial vulnerability of individual families. Putnam
accounts for the social changes taking place in the US by mentioning a number of factors
(pressures of time and money, mobility and sprawl, technology and mass media) but no role is
given to wealth inequality and to the abandonment of egalitarian policies.
4. On the design of the trust game
I have suggested that the equal division condition can explain a higher proportion of trustees
replies, and can be a reason for the puzzling results related to trust and trustworthiness obtained
in the experimental economics literature. Besides the shortcomings of neglecting such a
behavioural norm, it is also debatable whether the Trust Game reflects actual relations of trust.
The design of the game may indeed have a significant impact on experimental results. The Trust
Game was designed to reproduce a situation in which cooperation enhances efficiency. Hence, in
Berg et al. (1995), the experimenter triples the amount sent by the sender so as to create a higher
total outcome than if trust and reciprocity were absent. However, in the standard version of the
game, the preferred social outcome depends solely on the amount of trust placed by the trustor.
This implies that, if the trustor places full trust on the trustee, the social outcome of the
transaction will improve, regardless of the trustees actual behaviour. This game structure may be
sufficient to reproduce, in a laboratory setting, one-off interactions where, as stated by Fehr and
Rockenbach (2003, p. 138), bthe trustee has superior productive opportunities for the use of
economic resourcesQ. Still, there are three major reasons why the standard design of the trust
game does not correspond to all other relations of trust. First of all, if the Trust Game is to
provide any useful information on trustworthiness and cooperative behaviour other than
Trust games where a better social outcome depends only on trust, and not on the combination of trust and reciprocity,
can be found, for example, in Bohnet and Zeckhauser (2004), Burks et al. (2003), Guerra and Zizzo (2004), and McCabe
et al. (2003).
E. Ciriolo / European Journal of Political Economy 23 (2007) 10071024 1020
producing experimental data on trusting attitudes, it should incorporate the dynamic aspect of a
trust relation.
This implies a repeated game and/or designing the game in such a way as to
make the additional outcomebrought about by cooperationdependent on both trust and
reciprocity. Secondly, the standard version of the Trust Game introduces a perverse effect given
that, when the experimenter multiplies by k the amount sent by the trustor, the trustee has indeed
a higher incentive to defect as he would earn k times the amount sent. This is not a negligible
effect as peoples stance towards fairness, and reciprocity seems to depend on the overall stake.
Rabin (1993, p. 1284) claims that bpeople will not be as willing to sacrifice a great amount of
money to maintain fairness as they would be with small amounts of money.Q This suggests that,
when the profitability of defecting is high (as in the standard version of the trust game), people
are more tempted to pursue their self-interest at the expense of reciprocity.
Finally, the Trust
Game is amenable to a sociological interpretation of its results (for example, many studies draw
conclusions on how trust and trustworthiness vary by gender, professional status, race,
nationality, etc.). Still, to the extent to which the choices taken in the Trust Game depend on the
past (reflect a subjects past experience of similar interactions, deep-rooted beliefs, and
behavioural norms), the game implies an evolutionary perspective. In a repeated Trust Game,
and under an evolutionary perspective, a trustee acting according to the equal division
behavioural norm signals a propensity to cooperate at least as high as a trustworthy trustees.
Indeed, in the game of Glaeser et al. (2000), the two constraints coincide when the trustor is fully
trusting. This implies that in a repeated setting, should the trustor believe that the trustee will
abide by the behavioural norm of the first interaction, he or she is better off placing total trust on
the trustee, regardless of whether the trustor has been matched to a trustworthy trustee or to a
trustee adopting the equal division behavioural norm. In fact, in placing full trust regardless of
the trustee type, the trustor could expect maximum cooperation and therefore obtain the
maximum payoff. This point stands out even more in a repetition of the game in Berg et al.
(1995). Then, a utility-maximising trustor who believes that the trustee will adhere to the
behavioural norm adopted in the first interaction would have a greater incentive to place trust in
the trustee satisfying the equal division condition. This is particularly clear if we look at Fig. 7,
where the trustworthiness and the equal division lines intersect at the point where the amount
sent equals $5. For larger amounts, a trustworthy trustee would behave in such a way as not to
make the trustor worse off, even when the trustor is fully trusting. On the contrary, for amounts
sent above $5, a trustee satisfying the equal division condition would make the trustor better off
(as he would receive more than he had sent to the trustee). Therefore the latter trustee is
particularly worth of trust.
This conclusion merits a detailed analysis aimed at gauging the relative capabilities of the two
conditions (trustworthiness and equal division) in giving rise to an evolutionary stable
My feeling is that, with specific reference to the game in Berg et al. (1995),
even assuming that the trustee will always pocket his or her show-up fee, the repeated interaction
with a trustee following the equity condition is more likely to produce an evolutionary stable
equilibrium with full trust and full conditional trustworthiness. Indeed, should the trustor, by
accident or just to experiment to see what will happen, change his strategydeciding not to place
Indeed, as Gachter et al. (2004, p. 506) highlighted, bmost papers concentrate much more on trust than on
Under this perspective, experiments such those conducted by Johansson-Stenman et al. (2005), where the authors test
for the impact of stake size in trust games, are of great interest.
Skyrms (2004) is an excellent study of social interactions under the evolutionary perspective.
E. Ciriolo / European Journal of Political Economy 23 (2007) 10071024 1021
any trust and hence ensuring $10he would still have an incentive to return to his previous
strategy (as he could earn $15, though risking the trustees defection). On the contrary, the
repeated interaction between a trustor and a trustworthy trustee may well lead the couple to
spend some time in the equilibrium (full trust, full trustworthiness) but there may eventually be a
switch to the risk-dominant equilibrium (no trust, no action), since, in such a situation, an
untrusting trustor runs no riskthe trustee not being able to take any actionand does not forgo
any additional payoff (he would earn $10 either placing full trust or not placing trust at all).
5. Conclusions
Conventional economic theory is based on behavioural rules of pure self-interest. However,
experimental evidence shows that economic agents choices are affected by behavioural rules
such as altruism, trust, reciprocity and so on. Experimental economics is thereby providing an
invaluable contribution in filling the gap between the assumptions of neoclassical theory and the
motives underlying actual behaviour. At the same time, economic scholars are attempting to
identify a common pattern in the disjoint and somewhat conflicting empirical evidence (among
others, Rabin, 1993; Fehr and Schmidt, 1999; Bolton and Ockenfels, 2000) and to identify a
unifying model that can account for the different motives behind individual behaviour. The ideas
developed in the theory have however not always been used in interpretation of outcomes of
empirical games. In particular, in the Trust Game, the trustees replies falling below the
trustworthiness line cannot be dismissed as non-cooperative behaviour as, from an outcome-
based perspective, they may satisfy the equal division condition. This condition represents
another certainly weaker but non-negligible moral norm. Neglecting the equal division
behavioural norm, in the statistical analysis of the amount returned by the recipient, leads to
an overestimation of unconditional untrustworthiness. From the analysis of the extensive form of
the Trust Game, I solved the final payoffs of trustor and trustee for equality and obtain a measure
of the recipients conditional trustworthiness. This constitutes a weaker condition of
trustworthiness and assumes that trustworthy reciprocity may occur even when the amount
sent back by the trustee is strictly smaller than the amount that the trustor had sent forward, as
long as it satisfies the equal division condition. Yet, although controlling for equity concerns in
the statistical analysis of the amount returned by the recipient seems to be logical, relevant and in
line with the theory of equity and reciprocity, empirical analysis has not followed this path
(though Cox (2004) is an important step in this direction). One reason behind this reticence is
probably to be found in the empirical difficulty of a more complex analysis.
Finally, taking an outcome-based perspective, I found that a high proportion of trustees adopt
the equal division behavioural norm. I have also suggested that an unequal distribution of show-
up fees may deter trustors from placing trust, and may eventually reduce the incentive to
cooperate for both the trustor and the trustee. Consequently increasing income inequality may
underlie declines in the level of self-reported trust in high-income countries.
I thank Henry Capron, Georg Kirchsteiger and Jacques Thisse for useful conversations. I have
also benefited from the comments of seminar participants at Warwick University and at the
January 2005 Jamboree Enter Network (Free University of Brussels). My special thanks go to
Arye L. Hillman and three anonymous referees who all provided very helpful suggestions and
comments. I am indebted to S. Glaeser and J. Berg for allowing me to share their experimental
E. Ciriolo / European Journal of Political Economy 23 (2007) 10071024 1022
data. Financial support by the Belgian National Science Foundation (Project No. 2.4577.03) is
gratefully acknowledged.
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