Experimental Analysis of the Effect of Risk Perception on Trust

Year 2024, Volume: 8 Issue: 2, 590 - 618, 24.05.2024

Hasan Mert Kayaaslan , Erdem Seçilmiş

https://doi.org/10.25295/fsecon.1424670

Abstract

This study examines whether individuals with different risk attitudes exhibit different behaviors in trust-based relationships and whether experienced trust relationships influence risk attitudes and preferences. An original hybrid design is employed via experimental economic methods, which are becoming increasingly popular in the literature. The multiple price list developed by Holt & Laury (2002) is used to analyze individuals' risk preferences. To analyze the trust relationship between individuals, a version of the classic trust game introduced by Berg, Dickhaut & McCabe (1995) is preferred. The data obtained from the experiment are analyzed using various statistical tests and econometric methods. The findings indicate that risk preferences do not have a decisive role in trust decisions. However, it has been observed that trust experiences do influence individuals' risk preferences. When individuals consider a gain, their inclination to take risks decreases. Additionally, it is considered that individuals interpret transfers made to them as signals of increased cooperation, leading them to take more risks and approach the social optimum.

Keywords

Trust, Risk, Experiment

Supporting Institution

Hacettepe University

Project Number

SAY-2022-20324

Risk Algısının Güven Üzerine Etkisinin Deneysel Analizi

Abstract

Bu çalışmada risk tutumları ayrışan ajanların güvene dayalı ilişkilerde farklı davranışlar sergileyip sergilemedikleri ve tecrübe edilen güven ilişkilerinin risk tutum ve tercihlerini etkileyip etkilemediği araştırılmıştır. İlgili çerçevede yazında giderek popüler hale gelen deneysel iktisat yöntemleri kullanılarak özgün bir melez tasarım hazırlanmıştır. Bireylerin risk tercihlerini analiz etmek amacı ile Holt & Laury (2002) tarafından geliştirilen çoklu fiyat listesi uygulamasından istifade edilmiştir. Bireyler arasındaki güven ilişkisini çözümlemek için ise Berg, Dickhaut & McCabe (1995) tarafından yazına kazandırılan klasik güven oyununun bir sürümü tercih edilmiştir. Deney sonucunda elde edilen veriler çeşitli istatistiki testler ve ekonometrik yöntemler ile analiz edilmiştir. Bulgular, risk tercihlerinin güven kararı üzerinde belirleyici bir rolü olmadığını işaret etmektedir. Oysaki güven ilişkisi tecrübesinin bireylerin risk tercihlerini değiştirdiği gözlemlenmiştir. Bireyler güven ilişkisi sonucunda kendilerini kazançlı hissettiklerinde risk alma yatkınlıkları azalmaktadır. Ek olarak, bireylerin kendilerine yapılan transferleri iş birliğini arttırma sinyali olarak yorumlayıp daha fazla risk alma ve toplumsal optimuma yakınsama eğilimi içine girdikleri değerlendirilmiştir.

Keywords

Güven, Risk, Deney

Supporting Institution

Hacettepe Üniversitesi

Project Number

SAY-2022-20324

References

• Athearn, J. L. (1971). What is Risk?. The Journal of Risk and Insurance, 38(4), 639-645.
• Becker, G. M., DeGroot, M. H. & Marschak, J. (1964). Measuring Utility by a Single‐Response Sequential Method. Behavioral Science, 9(3), 226-232.
• Ben-Ner, A. & Halldorsson, F. (2010). Trusting and Trustworthiness: What Are They, How to Measure Them, and What Affects Them. Journal of Economic Psychology, 31, 64-79.
• Berg, J., Dickhaut, J. & McCabe, K. (1995). Trust, Reciprocity, and Social History. Games and Economic Behavior, 10, 122-142.
• Bohnet, I. & Zeckhauser, R. (2004). Trust, Risk and Betrayal. Journal of Economic Behavior and Organization, 55(4), 467-484.
• Bohnet, I., Greig, F., Herrmann, B. & Zeckhauser, R. (2008). Betrayal Aversion: Evidence from Brazil, China, Oman, Switzerland, Turkey, and the United States. American Economic Review, 98(1), 294-310.
• Brown-Kruse, J. & D. Hummels. (1993). Gender Effects in Laboratory Public Goods Contribution: Do Individuals Put Their Money Where Their Mouth Is?. Journal of Economic Behavior and Organization, 22(3), 255-267.
• Charness, G., Frechette, G. R. & Kagel, J. H. (2004). How Robust is Laboratory Gift Exchange?. Experimental Economics, 7, 189-205.
• Charness, G., Eckel, C., Gneezy, U. & Kajackaite, A. (2018). Complexity in Risk Elicitation May Affect the Conclusions: A Demonstration Using Gender Differences. Journal of Risk and Uncertainty, 56(1), 1-17.
• Chetty, R., Hofmeyr, A., Kincaid, H. & Monroe, B. (2021). The Trust Game Does Not (Only) Measure Trust: The Risk-Trust Confound Revisited. Journal of Behavioral and Experimental Economics, 90, 101520.
• Corcos, A., Pannequin, F. & Bourgeois-Gironde, S. (2012). Is Trust an Ambiguous Rather Than a Risky Decision. Economics Bulletin, 32, 2255-2266.
• Drichoutis, A. C. & Lusk, J. L. (2016). What Can Multiple Price Lists Really Tell Us About Risk Preferences?. Journal of Risk and Uncertainty, 53, 89-106.
• Eckel, C. C. & Wilson, R. K. (2004). Is Trust a Risky Decision?. Journal of Economic Behavior and Organization, 55(4), 447-465.
• Etang, A., Fielding, D. & Knowles, S. (2011). Does Trust Extend Beyond the Village? Experimental Trust and Social Distance in Cameroon. Experimental Economics, 14, 15-35.
• Fairley, K., Sanfey, A., Vyrastekova, J. & Weitzel, U. (2016). Trust and Risk Revisited. Journal of Economic Psychology, 57, 74-85.
• Fehr, E. (2009). On the Economics and Biology of Trust. Journal of the European Economic Association, 7, 235-266,
• Fehr, E., Fischbacher, U. & Kosfeld, M. (2005). Neuroeconomic Foundations of Trust and Social Preferences: Initial Evidence. American Economic Review, 95(2), 346-351.
• Fehr, E., Kirchsteiger, G. & Riedl, A. (1993). Does Fairness Prevent Market Clearing-An Experimental Investigation. Quarterly Journal of Economics, 108, 437-459.
• Fouragnan, E. (2013). The Neural Computation of Trust and Reputation. Doctoral Dissertation, University of Trento.
• Garapin, A., Muller, L. & Rahali, B. (2015). Does Trust Mean Giving and Not Risking? Experimental Evidence from the Trust Game. Revue D’´Economie Politique, 125, 701-716.
• Grootaert, C. (1998). Social Capital: The Missing Link. Social Capital Initiative Working Paper No. 3, The World Bank.
• Harrison, G. W. & Rutström, E. E. (2008). Risk Aversion in the Laboratory. C. Cox & G.W. Harrison (Eds). Research in Experimental Economics: Risk Aversion in Experiments. United Kingdom: JAI Press.
• Holt, C. A. & Laury, S. K. (2002). Risk Aversion and Incentive Effects. American Economic Review, 92(5), 1644-1655.
• Houser, D., Schunk, D. & Winter, J. (2010). Distinguishing Trust from Risk: An Anatomy of the Investment Game. Journal of Economic Behavior and Organization, 74, 72–81.
• Johnson, N. D. & Mislin, A. A. (2011). Trust Games: A Meta-Analysis. Journal of Economic Psychology, 32(5), 865-889.
• Knight, F. H. (1921). Risk, Uncertainty and Profit. Boston and New York: Houghton Mifflin Company.
• Kosfeld, M., Heinrichs, M., Zak, P. J., Fischbacher, U. & Fehr, E. (2005). Oxytocin Increases Trust in Humans. Nature, 435, 673-676.
• Ledyard, J. O. (1995). Public Goods: A Survey of Experimental Research. J. Kagel & A. Roth (Eds.), The Handbook of Experimental Economics. Princeton: Princeton University Press.
• Markowitz, H. M. (1952). Portfolio Selection. Journal of Finance, 7(1), 77-91.
• Rousseau, D. M., Sitkin, S. B., Burt, R. S. & Camerer, C. (1998). Not So Different After All: A Cross-Discipline View of Trust. Academy of Management Review, 23(3), 393-404.
• Sapienza, P., Toldra-Simats, A. & Zingales, L. (2013). Understanding Trust. The Economic Journal, 123, 1313-1332.
• Saukani, N. & Ismail, N. A. (2019). Identifying the Components of Social Capital by Categorical Principal Component Analysis (CATPCA). Social Indicators Research, 141, 631-655.
• Schechter, L. (2007). Traditional Trust Measurement and the Risk Confound: An Experiment in Rural Paraguay. Journal of Economic Behavior and Organization, 62, 272-292.
• Schilke, O., Reimann, M. & Cook, K. S. (2021). Trust in Social Relations. Annual Review of Sociology, 47, 239-259.
• Slonim, R. & Guillen, P. (2010). Gender Selection Discrimination: Evidence from a Trust Game. Journal of Economic Behavior and Organization, 76, 385-405.
• Spence, M. (1973). Job Market Signaling. Quarterly Journal of Economics, 87(3), 355-374.
• Starmer, C. & Sugden, R. (1991). Does the Random-Lottery Incentive System Elicit True Preferences? An Experimental Investigation. American Economic Review, 81(4), 971-978.
• Stefánsson, H. O. & Bradley, R. (2019). What is Risk Aversion?. The British Journal for the Philosophy of Science. 70(1), 77-102.
• Taşdemir, M. (2007). Belirsizlik Altında Tercihler ve Beklenen Fayda Modelinin Yetersizlikleri. Anadolu Üniversitesi Sosyal Bilimler Dergisi, 7(1), 307-318.
• Von Neumann, J. & Morgenstern, O. (1944). The Theory of Games and Economic Behaviour. Princeton: Princeton University Press.
• Werner, Jan (2008). Risk Aversion. The New Palgrave Dictionary of Economics, 1-6.
• Willett, A. H. (1951). The Economic Theory of Risk and Insurance. Philadelphia: University of Pennsylvania Press.
• Wilson, R. K. (2018). Trust Experiments, Trust Games, and Surveys. E. M. Uslaner (Ed.), The Oxford Handbook of Social and Political Trust. Oxford: Oxford University Press.
• Xue, J. (2023). Trusting Behavior, Risk Preference and Loss Aversion. Journal of Economic, Business and Management, 11(2), 57-62.