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1 Introduction
Sometimes, cooperation can be mutually profitable and can be foreseen to run smoothly.
However, sometimes cooperation will not materialize because the actors involved an-
ticipate trouble along the route to mutual profit. As our main paradigm representing
a potentially mutually profitable enterprise between two actors, we consider the Trust
Game (Dasgupta 1988; Kreps 1990; Snijders 1996). Figure 1 shows the Trust Game in
its general format. A lack of trust renders players 1 and 2 a payoff (P1 ,P2 ), whereas trust
that is honored will result in the Pareto-improvement (R1 ,R2 ). Unfortunately, player 2 is
tempted to abuse the trust given to him because that would give player 2 an even larger
payoff of T2 . Foreseeing the abuse of player 2, which would leave player 1 with only S1 ,
player 1 might well decide not to trust player 2, which in turn results in both players
getting the Pareto-inferior (P1 ,P2 ) outcome.
There are many conditions under which cooperation problems like in the Trust Game
are less severe or even completely absent. For instance, when the interaction is guarded
by norms of altruism or reciprocity (Gouldner 1960), when interactions are embedded
over time, or when the existence of social networks ensures cooperative behavior through
the effects of reputation (Raub and Weesie 1990; Buskens 1999). In this contribution, we
restrict our attention to posting hostages in the sense of Schelling (1960) as a solution to
the cooperation problem. Although the word ‘hostage’ may cause confusion since it can
be associated with ‘hostage taking’ (which is not what we are dealing with), we maintain
this terminology as as a tribute to Schelling’s original work (cf. Schelling 1960, since
he was (one of) the first to recognize the general mechanism of reshaping the incentive
structure to attain a mutually profitable outcome. Also in more recent work he repeatedly
emphasized the usefulness of hostage posting, especially in cases in which trust is essential
to the interaction. In his (1984) words:
∗
Stimulating comments of and discussions with Werner Raub and Jeroen Weesie are gratefully ac-
knowledged. Financial support was provided by the Netherlands Organization for Scientific Research
(NWO) under grant PGS 50-370 and the Royal Netherlands Academy of Arts and Sciences (Snijders) .
Address: Department of Sociology, Utrecht University, Heidelberglaan 1, 3584 CS Utrecht, the Nether-
lands. Email: c.snijders@fss.uu.nl.
1
Player 1Player 2
no trust-
Player 1 P1 P2
trust
?
abuse
Player 2 - S1 T2
honor
- R1 R2
“(...) hostages (...) are techniques for structuring incentives to assure compli-
ance. And when trust or confidence is essential to an enterprise, the hostages
may be given voluntarily. (...) The procedure may be demanded or volun-
teered; when volunteered, it is not altogether different from the voluntary
jeopardy that people incur when they post bail or pawn a camera.”
What prevents the mutually cooperative outcome to emerge, is not so much player 2’s
incentive to abuse trust per se, but it is player 1 anticipating the abuse of trust by player 2.
This is why it is also in player 2’s interest to convince player 1 that he will not abuse trust
if it is given. One way to try to convince player 1, would be for player 2 to (voluntarily)
decrease (or remove) the incentive to abuse trust. This mechanism—decreasing one’s own
incentives—is how we operationalize Schelling’s “hostage posting”. Using experiments on
Trust Games, we consider the conditions under which hostage posting in the Trust Game
solves the trust problem.
2 Theory
To see how a hostage can change the incentive structure, consider the game in Figure 2.
Player 2 has to decide whether or not to restrict his own future incentives by posting
a hostage. Posting a hostage creates a change in the incentive structure by imposing a
sanction on abusing trust. If the hostage is not posted, player 1 and player 2 play a
Trust Game ΓTG with monetary payoffs (S1 ,P1 ,P2 ,R1 ,R2 ,T2 ). If player 2 posts a hostage
of monetary value H, then player 1 and player 2 play a Trust Game Γ0TG with monetary
payoffs (S10 ,P1 ,P2 ,R1 ,R2 ,T20 ), where S10 = S1 + H1 and T 0 = T2 − H2 . The hostage has an
impact on the monetary payoffs of the underlying ΓTG only in the case that player 2 has
posted the hostage. Suppose that player 1 decides to trust player 2, and subsequently
player 2 abuses player 1’s trust. In that case, player 2 gets T2 − H2 (instead of T2 ), and
player 1 gets S1 + H1 (instead of S1 ). This way, the hostage not only puts a penalty on
abusing trust for player 2, but it also gives compensation for abused trust to player 1 (if
2
Player 1 Player 2
RIGHT
-
Player 1 P1 P2
DOWN
?
RIGHT
-
Player 2 S1 + H 1 T2 − H2
Post
hostage
DOWN
- R1 R2
Player 2
RIGHT
-
Do not Player 1 P1 P2
post hostage
DOWN
?
RIGHT
-
Player 2 S1 T2
DOWN
- R1 R2
H1 > 0).1 For obvious reasons, the Trust Game with a hostage option is called a Hostage
Trust Game. Whereas a Trust Game is defined by the values (S1 , P1 , P2 , R1 , R2 , T2 ), a
Hostage Trust Game ΓHTG is defined by (S1 , P1 , P2 , R1 , R2 , T2 ; H1 , H2 ).
A hostage in a Trust Game solves the trust problem if four conditions are fulfilled. (1)
Player 1 would not be willing to trust player 2 in a certain Trust Game ΓTG ; (2) player 1
would also not trust player 2 if player 2 had not posted the hostage in the Hostage Trust
Game ΓHTG ; (3) player 1 trusts player 2 after player 2 has posted the hostage; and (4)
player 2 honors trust after posting the hostage and after player 1 has trusted player 2.
In short, a hostage solves a problem of trust, if the hostage convinces player 1 to trust
player 2 after the hostage has been posted, and player 1’s trust is justified: player 2 honors
trust.
Two kinds of hostages are—from an analytical point of view—less interesting, even
though they are likely to solve a problem of trust. Hostages that fully compensate player 1
in case his trust gets abused and hostages that completely bind a player 2 to honor trust.
In Figure 2, consider the game that arises after player 2 has posted the hostage. The
subsequent game after a hostage has been posted that fully compensates player 1 in case
of abused trust (H1 > P1 − S1 ) is no longer a Trust Game in monetary terms. The
1
All hostages are assumed to fulfill H2 ≥ 0. This specification disregards the expropriation hazard
(Becker 1991: 12–13,Williamson 1985: 177): a posted hostage can only be lost if player 2 has indeed
abused trust.
3
problem of trust is definitely “solved” in that case, as long as utility is assumed to be
increasing in own monetary gains. In this case, there is no longer any need to fear being
cheated as player 1. We call this a bribing hostage. After a hostage has been posted that
removes the incentive to abuse trust for player 2 (H2 > T2 − R2 ), the subsequent game
is also no longer a Trust Game in monetary terms. Any sensible player 2 would honor
trust after such a hostage was posted. Unless player 1 thinks that player 2 is not that
sensible (which sometimes seems to be the case, cf. Rosenthal 1981; Beard and Bell Jr
1994; Keren and Raub 1993), player 1 will trust a player 2 who posts such a hostage. As
long as player 2’s utility function is increasing in his own monetary gains (and player 1
knows it), the problem of trust has also been solved. We call this a completely binding
hostage. We do not consider hostages that are either bribing or completely binding.
Suppose player 2 posts the hostage. There are two ways in which player 2’s decision
may affect player 1’s subsequent behavior. Player 1 can decide to trust player 2 because
the mere fact that player 2 posted the hostage signals that player 2 is the kind of player
4
that is going to honor trust in the Trust Game Γ0TG . Player 1 then considers the hostage
to be type revealing. Or, player 1 can decide to trust player 2 because he considers it
likely enough that player 2 will honor trust in the Trust Game Γ0TG even though player 1
may not have been willing to trust player 2 in the Trust Game Γ TG . Player 1 considers
the hostage to be binding. We argue that in the case of the Hostage Trust Game, under
reasonable conditions, type revealing hostages do not exist.
5
Player 1 Player 2
¬ Trust P1 P2
1l
T2 − H2
Honor S1 + H 1
Post l −γ2 |T2 − S1 − H1 − H2 |
Trust 2
Hostage
¬ Honor R1 R2
2l
Do not post
¬ Trust P1 P2
Hostage
1l
Honor S1 T2 − γ2 (T2 − S1 )
Trust l
2
¬ Honor R1 R2
Trust Games he would prefer to be in, while taking into account that whether player 1
will choose to trust player 2 may well depend on player 2’s hostage posting decision.
The appropriate game-theoretic format is a game of incomplete information. Actually,
for analytical purposes, Figure 3 is not the correct way to proceed. We should have
depicted a game tree in which “Nature” moves first and chooses a value γ2 for player 2.
Whereas the distribution out of which the γ2 was chosen is assumed to be common
knowledge, only player 2 knows its value. In principle, the posting of a hostage could
reveal something to player 1 about the value of γ2 . For instance, an extreme case would
be the one in which player 2 follows one of two possible strategies: either player 2 posts and
subsequently honors trust, or player 2 does not post a hostage and will not honor trust. In
such a case (a “separating equilibrium”), if player 2 posts a hostage, this unambiguously
displays the fact to player 1 that he can trust player 2. However, something of that nature
can never occur in the Hostage Trust Game in its guilt model format.
To see why player 1 can never infer something about γ2 after the hostage has (or
has not) been posted, suppose that player 1 trusts player 2 if and only if player 2 has
posted a hostage. Player 2’s decision then reduces to either not posting the hostage and
getting P , or posting the hostage and getting at least R. Hence, irrespective of the value
of γ2 , player 2 will decide to post the hostage, and player 1 cannot infer anything about
the value of γ2 on the basis of player 2 posting a hostage. Allowing for the use of more
sophisticated strategies, for instance, strategies in which player 1 decides to trust player 2
with probability qh after player 2 posts a hostage, and trusts player 2 with probability qn
(qh > qn ) otherwise, does not lead to different results (see Snijders 1996: Appendix B).
Likewise, it could be argued that since posting a hostage does not give player 1 any
information about the value of γ2 , posting no hostage also does not provide player 1 with
information about γ2 .4 This immediately implies the next hypothesis.
4
Not posting the hostage is not part of the game-theoretic equilibrium. It is therefore not obvious
what player 1 should think given that player 2 declines to post the hostage. We assume that when
6
Hypothesis 4 Not posting a hostage has no negative side effects.
Consider a Trust Game ΓTG and a related Hostage Trust Game ΓHTG with a
hostage that is not bribing and not completely binding (H1 < P1 − S1 and
H2 < T2 − R2 ). Player 1’s decision whether or not to trust player 2 in the
Trust Game ΓTG is the same as player 1’s decision whether or not to trust
player 2 in the Hostage Trust Game ΓHTG after player 2 has declined to post
the hostage. In other words, the mere fact that player 2 has not posted the
hostage in the Hostage Trust Game, should have no additional influence.
The previous hypothesis compares player 1’s decision in a Trust Game with player 1’s
decision in a (related) Hostage Trust Game. Based on the same argument as above,
another sensible comparison could be made. Again, consider Figure 3. Compare the
two Trust Games ΓTG and Γ0TG that arise as subgames in that Hostage Trust Game,
dependent on player 2’s decision to post the hostage. Define p2,1 as the subjectively
expected probability that player 2 will honor trust, as assessed by player 1. If nothing
can be deduced from the fact that player 2 posts the hostage, player 1 will trust player 2
after no hostage has been posted if (and only if) p2,1 > RP11−S 1
−S1
, and player 1 will trust
P1 −S1 −H1 +γ2 (T2 −S1 −H1 −H2 )
player 2 after a hostage has been posted if (and only if) p2,1 > R1 −S1 −H1 +γ2 (T2 −S1 −H1 −H2 ) .
In other words, whether player 1 trusts player 2 is solely dependent on these two indices.
No additional effect of the posting of a hostage can exist. Rephrased as a hypothesis:
after player 2 chooses not to post the hostage. If player 2 did choose to post the hostage,
player 1 trusts player 2 if and only if p2,1 > RP11−S 1 −H1 +γ2 (T2 −S1 −H1 −H2 )
−S1 −H1 +γ2 (T2 −S1 −H1 −H2 )
. This immediately
such an “out of equilibrium move” occurs, player 1 does not alter his beliefs about the γ2 of player 2.
According to the classification by Rasmusen (1994: 151), this assumption is called “passive conjectures”.
Cf. McLennan (1985) and Cho and Kreps (1987).
7
implies that player 1 will be “convinced” by the hostage if and only if both the previous
inequalities hold. In that case the hostage was essential in solving the problem of trust:
player 1 does not trust player 2 without the hostage, but does trust player 2 if the hostage
is posted.
3 Data
We test our hypotheses using experimental data. An outline of the design follows below.
Additional details, including the complete instruction text, can be found in Snijders (1996:
8
Chapter 3).
Subjects
The study was conducted in two Dutch universities, the University of Amsterdam and
the University of Groningen. Subjects were recruited by campus advertisements and
were promised at least 10 Dutch guilders (and the possibility for a larger reward) for
participation. Nearly all participants were undergraduates from a variety of disciplines
with the exception of the study in Amsterdam in which 71 out of the 120 (59%) subjects
were students of Economics or Econometrics. The purpose of the latter sample was to
test whether these students respond differently since previous research (Frank, Gilovich,
and Regan 1993) suggests that they were more likely to behave in accordance with the
strict economic interpretation of game theory. Two subjects were removed from the data
set because it was clear from the questions they asked during the session that they did
not understand the essentials of the task. A few other subjects failed to make a choice
(e.g., one subject wrote “my choice depends on who player 2 will be”) or responded in an
unclear manner. Eventually, 8 out of a total of 234 subjects were eliminated from further
analysis.
The subject population can be considered a more or less standard student population,
with the exception of the large percentage of students in economics or econometrics. A
second conspicuous aspect is the large proportion of males in the Amsterdam experiment.
This cannot be accounted for by the large proportion of students in econom(etr)ics, since
if only the non-econom(etr)ics students are considered, the large proportion of males
remains. Though we do not expect an effect of sex, it is something to keep in mind during
the analyses.
Procedure
Subjects were seated in a room with (about) fourteen other participants, always able to
see each other. The experimenter informed subjects (orally) that the experiment would
consist of a number of different tasks, some of which would concern choices regarding
monetary outcomes. They were further instructed to think carefully about their choices
because it was possible that (at the end of the session) some of them would be paid in
accordance with one of their choices. The procedure to determine the subjects who would
be paid and the specific game were explicitly outlined. First, one of the games was to
be randomly selected followed by a random selection of two subjects who would then be
paid according to their choices in that particular game. The procedure was explained by
means of a hypothetical example.
9
The purpose of applying such a procedure was to exclude “wealth-effects” (e.g., Kah-
neman and Tversky 1979; Davis and Holt 1993). Since each decision situation is selected
with equal probability, choices in each situation enter a subject’s overall expected utility
as additively separable components. Consequently, each component can be maximized
separately and potential earnings in one game should not affect decisions in other games.
The method is supposed to increase subjects’ motivation as there were considerable sums
of money at stake. The maximum amount a subject could earn was 120 Dutch guilders
(about 75 US$) which, according to student standards, is certainly a substantial amount.
Subjects were explicitly told that there were no “right” or “wrong” answers. They
were instructed to complete their tasks in the order in which they were presented in the
instruction text, and were given the possibility to ask the experimenter for assistance. In
each study, subjects performed three or four decision making tasks in which the Trust
Game task was the first one.
Tasks
Subjects were told that they were to complete several tasks: five Trust Games, a ques-
tionnaire, five Hostage Trust Games, and some other tasks not related to this experiment,
see Snijders 1996: 68).
The Trust Games were described (without mentioning concepts like trust or fairness)
by referring to a card with a display of a Trust Game in its extensive form. Subjects were
asked to determine whether they would trust player 2 in case they would be player 1,
and if they would honor trust of player 1 in case they would be player 2. These choices
constitute the (dummy) variables trust and honor trust.
For the Hostage Trust Games the instruction text pointed out that, again, subjects
had to make a decision as if they were player 1 and as if they were player 2 in certain
games. It was added that the game (and the rules) were the same as in the basic Trust
Game task, with one exception. Now, player 2 must make the first decision and must
decide whether or not to post a hostage,5 after which player 1 and player 2 play either a
regular or an altered Trust Game. If player 2 decides not to post the hostage, player 1
and player 2 subsequently play a regular Trust Game. But, if player 2 does decide to
post a hostage, then the payoffs for the case where player 1 subsequently chooses DOWN and
player 2 chooses RIGHT in a Trust Game are changed. In the Hostage Trust Game task
as presented in Groningen the hostage would just be “lost” and player 1 would get his or
her regular S1 -payoff. In Amsterdam, the hostage would be given to player 1, who would
then end up with S1 + H1 instead of just S1 . Subjects were asked the following questions:
1. About player 1
• If you were player 1, and player 2 had posted the hostage, would you then
choose RIGHT or DOWN?
• If you were player 1, and player 2 had not posted the hostage, would you then
choose RIGHT or DOWN?
2. About player 2
10
Table 2: Payoffs of the 35 (XX IK TEL MAAR 33) different Hostage Trust Games used
in the experiments (H is the value of the hostage, P1 = P2 , R1 = R2 , number of subject
for each condition in parentheses).
Groningen
Version 1 Version 2 Version 3 Version 4
No. ΓTG S1 -Pi -Ri -T2 H (#) H (#) H (#) H (#)
1. 10-30-60-75 5 (25) – (–) – (–) – (–)
2. 10-30-45-70 – (–) 20 (26) – (–) – (–)
3. 15-40-50-75 – (–) – (–) 5 (27) – (–)
4. 5-35-75-95 – (–) – (–) – (–) 40 (28)
Amsterdam
Version 1 Version 2 Version 3 Version 4
No. ΓTG S1 -Pi -Ri -T2 H (#) H (#) H (#) H (#)
3. 15-40-50-75 5 (30) 10 (30) 15 (30) 20 (30)
5. 10-30-60-80 10 (30) 15 (30) 20 (30) 5 (30)
6. 15-40-50-85 10 (30) 15 (30) 20 (30) 5 (30)
7. 10-30-45-100 15 (30) 20 (30) 5 (30) 10 (30)
9. 15-40-50-85 25 (30) 10 (30) 15 (30) 20 (30)
• If you were player 2, would you—given your answer to the previous question—
choose RIGHT or DOWN after player 1 has chosen DOWN?6
Table 2 summarizes the values of the hostages that were included in the two places
where this task was conducted, Groningen and Amsterdam. As an example, consider
Trust Game 1. This game was used in the Groningen sessions (Version 1) only. The
value of the hostage equaled 5. From the 106 subjects in Groningen, 25 had to decide in
this Hostage Trust Game. Now consider Trust Game number 9. This game was used in
the Amsterdam sessions only (in all versions). The value of the hostage equaled 25, 10,
15, and 30 in Versions 1 through 4. From the 120 subjects in Amsterdam, 30 subjects
participated per version.
The decisions of subjects in the role of player 1 and player 2 constitute the variables
trust (2 posts no hostage) and trust (2 posts hostage) for player 1, and post
hostage and honor trust (given own hostage decision) for player 2. Since subjects
were only presented Hostage Trust Games that were based on Trust Games they had
decided on before, this allows for a direct (within-subjects) comparison between subjects’
behavior in Trust Games and Hostage Trust Games. The value of the hostage constitutes
the variable hostage in the data.
6
Suppose a certain player 2 chose not to post the hostage. Note that this player 2 is then not asked
what he would do after he had posted the hostage, and player 1 had chosen DOWN. The decision not to
ask this to player 2 is defensible, but leads to some difficulties later (see Section 3).
11
In between the choices on Trust Games and those on Hostage Trust Games, subjects
were asked to fill out a questionnaire which included questions about their sex, age,
field of study, knowledge of game theory, whether they were a blood donor, whether
they carried a donor codicil, and composition of their high school final examinations
(whether it included math, physics, economics, French and/or history). The answers
to these questions constitute our control variables male, age, economist, game theory,
blood donor, and codicil. A factor analysis of the composition of subjects’ examination
package constitutes a single variable labeled school. However, the variables blood donor,
game theory, and school did not approach significance in any of the analyses. They were
not incorporated in the final analyses.
One extra complication has to be tackled before reporting the analyses. In the Hostage
Trust Games task, a player 2 was only asked whether they would post the hostage and
given this decision whether they would honor player 1’s trust. If player 2—for a particular
Hostage Trust Game—chose to post the hostage, the data do not contain whether this
player 2 would have honored trust if he had not posted the hostage. That is, subjects did
not answer a question like “You have posted a hostage. But suppose you had not, and
suppose that player 1 trusts you, what would you do?”. The main reason for excluding
this question was that the answers would probably not be very reliable and might confuse
the subject about the consequences of posting a hostage. But we would like an answer to
the question what player 1 would do if he were player 2. It makes sense to just use honor
trust (given own hostage decision) in this case. If player 2 has not posted the
hostage, player 2’s score on honor trust (given own hostage decision) is precisely
what we want to know. If player 2 has posted the hostage and player 2 does not honor
trust (in the Hostage Trust Game), it is likely that player 2 would not have honored trust
if he had not posted the hostage as well. Again, honor trust (given own hostage
decision) seems a good proxy. The only problem arises when player 2 has posted the
hostage and player 2 honors trust. It is then not clear what player 2 would have done,
had he not posted the hostage. Two solutions are possible. Either replace the value of
honor trust (given own hostage decision) by the variable honor trust from the
related Trust Game for those cases where player 2 has not posted the hostage, or just
use honor trust (in the Hostage Trust Game) as it is. Since it turned out to make
no substantial difference in the analyses, all analyses are presented using honor trust
(given own hostage decision).
4 Analyses
All analyses are restricted to hostages that are not bribing (H1 < P1 − S1 ) and are not
completely binding (H2 < T2 − R2 ). One could argue that all subjects who (when in
the role of player 1) chose to trust player 2 in a Trust Game, can be excluded from the
analysis. Apparently, they saw no problem of trust, so for them there just is no problem of
trust, and it makes no sense to consider cases where a subject was proposed a solution (a
hostage) for a trust problem he does not have. This is a theoretically valid argument, but
empirically it does not make much difference whether they are excluded or not. Adding
a dummy variable that equals 1 if and only if player 1 trusts player 2 in the Trust Game,
does not lead to substantially different results. None of the displayed results are restricted
to those subjects who had a problem of trust. Instead, the complete data set was used.
12
Table 3: Overview of the data.
In correspondence with the previously given definition, we define labels for the degree of
compensation and the degree of binding.
H1
• compensation = P1 −S1
, and
H2
• binding = T2 −R2
.
13
Table 4: Probit analysis of the probability that player 1 trusts player 2 after hostage
posting. Standard errors are adapted for clustering within subjects.
14
As a test of these intuitions, the results in Table 4 make sense. On the other hand, what
happens in Trust Games depends on risk and temptation, which was supported in the
analyses. Therefore, it could be argued that the impact of the hostage on trust in Hostage
Trust Games is not brought about by compensation and binding, but by the effect of
the hostage on risk and temptation. This suggests that the previous analyses should
be repeated with risk ( PR11 −S1 −H1
−S1 −H1
) and temptation ( T2T−S
2 −R2 −H2
1 −H1 −H2
) included. The effect of
compensation and binding should then disappear, or at least change. However, adding
the variables risk and temptation does not make the effect of compensation completely
disappear, and the effect of compensation remains larger than the (non-significant) effect
of binding. Together, these results imply that Hypotheses 1 and 3 are supported
and that Hypothesis 2 is not supported.7 Moreover, although one could argue that
the effect of binding or temptation in Hostage Trust Games runs through the variable
honor trust, deleting the variable honor trust from the analysis does not lead to other
insights.
15
Table 5: Probit analysis of the probability that player 1 trusts player 2. Comparison be-
tween Hostage Trust Games without a hostage being posted, and Trust Games. Standard
errors are adapted for clustering within subjects.
For our fifth hypothesis we try to determine in a similar manner if there exists a
positive effect of posting the hostage, other than the change in the payoffs it induces.
We compare—within a Hostage Trust Game—player 1’s decision to trust player 2 in the
subgame that emerges after player 2 has posted the hostage, with player 1’s decision to
trust player 2 in the subgame that emerges after player 2 has not posted the hostage. The
data were transformed so that each subject represents 10 observations instead of 5: per
Hostage Trust Game, the data contain what a subject chose in the role of player 1 after
player 2 has posted the hostage, and what a subject chose in the role of player 1 after
player 2 has not posted the hostage. Each subject made his decisions for 5 Hostage Trust
Games, and each Hostage Trust Game has 2 Trust Games as subgames, which yields the
10 observations per subject. The dummy-variable hostage was posted was added to
capture the effect of having posted the hostage. To really measure the net effect of having
posted the hostage, we need to control for the change in the payoffs that is brought about
by posting the hostage. For that purpose, we added the variables risk and temptation
to the analyses. Table 6 summarizes the results.
As can be seen in Table 6, the effect of the payoffs after controlling for honor trust
is restricted to an effect of risk. A small effect of codicil is once again encountered:
subjects carrying a donor codicil have a higher estimated probability (0.25 compared
to 0.17) to trust player 2. Effects in the same order of magnitude are found for male
and economist. Males are more likely to trust player 2, subjects who study economics
16
Table 6: Probit analysis of the probability that player 1 trusts player 2 in a Hostage
Trust Game. Comparison within Hostage Trust Games. Standard errors are adapted for
clustering within subjects.
are less likely to trust player 2. The effect of the posting of a hostage once again is
significant and substantial. Distinguishing the effect of the hostage in the Groningen and
Amsterdam experiment, we find an estimated positive effect of the posting of a hostage
on the probability that player 1 trusts player 2 of 0.30 (0.17 to 0.47) in Amsterdam, and
of 0.12 (0.17 to 0.29) in Groningen.8 The difference between Groningen and Amsterdam
with respect to the effect of the posting of a hostage is somewhat puzzling. It could be
due to the fact hostages, if lost, were paid to player 1. The more noteworthy fact is that
once more a significant effect of the posting of the hostage is encountered. Hypothesis 5
that stated that player 1’s decision whether or not to trust player 2 is solely based on the
payoffs that are brought about by player 2’s decision (and not by the posting of a hostage
itself) is rejected.
Apparently, hostage posting by player 2 triggers trustfulness in player 1. One way
to incorporate that in our measurement models, would be to assume that the posting of
a hostage increases player 1’s subjective probability that player 2 will honor trust, and
this increase is larger for a large degree of compensation of the hostage. In our analyses,
this would imply a hypothesized interaction effect hostage was posted × compensation
on trust. Additional analyses incorporating this interaction effect indeed resulted in a
positive (and significant) interaction effect hostage was posted × compensation. That
8
Incorporating additional interaction effects with Groningen does not reveal other differences between
Groningen and Amsterdam (analyses not reported).
17
Table 7: Probit analysis of the probability that player 1 trusts player 2 if and only if
player 2 posts the hostage. Standard errors are adjusted for clustering within subjects.
is, the larger the degree of compensation of the hostage, the larger the effect of the mere
posting of a hostage on player 1’s subjective probability that player 2 will honor trust.
18
Table 8: Probit analysis of the probability that player 2 honors player 1’s trust. Compar-
ison between Hostage Trust Games without a hostage being posted, and Trust Games.
Standard errors are adapted for clustering within subjects.
supported with regard to the reduction of risk, but the evidence in favor of the reduction
of temptation is weak.
19
Trust Game conditional on whether or not they posted a hostage before. Adding the
variable post hostage or restricting the analysis to the cases in which player 2 has not
posted the hostage, does also not lead to substantially different results. In all cases, the
non-significance of the effect of hostage game (for Groningen and Amsterdam) remains.
This implies that Hypothesis 7 is supported.
20
confirmed this result (a positive effect of posting the hostage of 0.10 in Groningen, and
0.27 in Amsterdam). Though the effects are not that large, the theory is evidently refuted
here: posting a hostage works to build trustfulness, even though a theoretical argument
is hard to imagine.10 And although player 1 considers posting a hostage as a signal for
trustworthiness, the fact that posting a hosting does not change player 2’s behavior shows
that the hostage posting signal is deceptive.
Finally, a word of advice for those who want others to trust them. First, post the
hostage when you can, even if it hardly affects the payoffs. “Not doing something to
overcome the problem” reflects badly on your trustworthiness. Second, if you have a
choice, post a hostage that provides some compensation to the trustor. Whether it binds
yourself to honor trust is of lesser importance to the trustor. Similar advice can be given
to those who have to decide whether or not to trust someone. First, do not mind too
much about whether or not the other person posted the hostage or not, but keep your eye
on what the hostage—if offered—does with the incentive for the trustee. In any case, do
not be taken in by the mere fact that a hostage is being posted. This “signal of benign
intent” does not induce a moral imperative to honor trust.
References
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10
Another indication that hostage posting affects the trust decision is the fact that the goodness of fit
of the theoretical model that predicts trust after hostage posting on the basis of risk and temptation
is worse for Hostage Trust Games than for Trust Games.
21
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Free Press.
with ζi a (vector of) characteristics of player i (like sex or age) and ijg
1 ∼ N (0, σ 2 ) the
independently distributed error terms. It follows that
Pr {Hostage is essential} =
P1 − S1 P1 − S1 − H1 + γ2 (T2 − S1 − H1 − H2 )
= Pr p2,1 (¬H) < and p2,1 (H) >
R1 − S 1 R1 − S1 − H1 + γ2 (T2 − S1 − H1 − H2 )
(
P1 − S1 T2 − R2
= Pr ijg
1 (¬H) < − ζi − β and
R1 − S 1 T2 − S1 g
22
)
P1 − S1 − H1 + γ2 (T2 − S1 − H1 − H2 ) T2 − R2 − H2
ijg
1 (H) > − ζi − β .
R1 − S1 − H1 + γ2 (T2 − S1 − H1 − H2 ) T2 − S1 − H1 − H2 g
Pr {Hostage is essential} =
(
P1 − S1 − H1 + γ2 (T2 − S1 − H1 − H2 ) T2 − R2 − H2
Pr − ζi − β < ijg
1 <
R1 − S1 − H1 + γ2 (T2 − S1 − H1 − H2 ) T2 − S1 − H1 − H2 g
)
P1 − S1 T2 − R2
− ζi − β ≈
R1 − S 1 T2 − S1 g
1 P1 − S1 ζi β T2 − R2
Φ − − −
σ R1 − S 1 σ σ T2 − S1
1 P1 − S1 − H1 + γ2 (T2 − S1 − H1 − H2 ) ζi β T2 − R2 − H2
Φ − − ,
σ R1 − S1 − H1 + γ2 (T2 − S1 − H1 − H2 ) σ σ T2 − S1 − H1 − H2
with Φ the standard normal cumulative distribution function.11 Even given the simplifying
assumption on the error terms, the extra Φ-term that pops up here causes the statistical analysis
to be non-trivial. Although the probability that the hostage is essential increases with
1 P1 − S1 ζi β T2 − R2 1 P1 − S1 − H1 + γ2 (T2 − S1 − H1 − H2 ) ζi β T2 − R2
Φ − − −Φ − − ,
σ R1 − S1 σ σ T 2 − S1 σ R1 − S1 − H1 + γ2 (T2 − S1 − H1 − H2 ) σ σ T 2 − S1
P1 −S1
this need not imply that it increases with, say, R1 −S1
. We simplify further by assuming
that the Φ(.)-terms are in the range [0.08, 0.4] (a more detailed analysis of this issue and an
explanation why this is reasonable can be found in Snijders 1996: 162–164. On that range, a
linear approximation of Φ performs reasonable. For instance, Φ(x) ≈ 0.28x + 0.44 (the first
order Taylor expansion in x = Φ−1 (0.2)). Since this implies that Φ(x) − Φ(y) ≈ Φ(x − y) − 0.44,
it follows that
Pr {Hostage is essential} =
T2 − R2 P1 − S1
= Φ −3.96 + 1.99 + 3.9 −
T2 − S1 R1 − S 1
T2 − R2 − H2 P1 − S1 − H1
Φ −3.96 + 1.99 + 3.9 ≈
T2 − S1 − H1 − H2 R1 − S 1 − H 1
T2 − R2 P1 − S1 T2 − R2 − H2 P1 − S1 − H1
= Φ 1.99 + 3.9 − 1.99 − 3.9 − 0.44.
T2 − S1 R1 − S 1 T2 − S1 − H1 − H2 R1 − S 1 − H 1
11
The “≈” is necessary since it need not be the case that
P − S − H + γ (T − S − H − H )
h T −R −H i P 1 − S1
h T2 − R2
i
1 1 1 2 2 1 1 2 2 2 2
− ζi − β < − ζi − β .
R1 − S1 − H1 + γ2 (T2 − S1 − H1 − H2 ) T2 − S1 − H1 − H2 g R1 − S1 T2 − S1 g
23
= Φ (1.99 reduction of risk + 3.9 reduction of temptation) − 0.44.
A winding detour, but a relatively straightforward result: the larger the reduction of risk the
hostage induces, the more likely that the hostage is considered essential. And likewise, the larger
the reduction of temptation a hostage induces, the more likely that the hostage is considered
essential. The former effect is larger than the latter. A more pragmatic way of dealing with the
statistics would be to conclude—on the basis of the above analysis—that reduction of risk
and reduction of temptation must have something to do with essential hostage.
24