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Decomposing trust into risk preferences, altruism, and subjective beliefs: An experimental analysis
There is a sizeable economic literature dedicated to understanding trust and the extent to which it influences decision making. Although trust is difficult to measure, experimental economics has commonly used the 'amount sent’ in the Berg, Dickhaut and McCabe (1995) investment game to elicit levels...
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| Format: | Thesis |
| Language: | English |
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School of Economics
2020
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| _version_ | 1867613194371989504 |
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| access_status_str | Open Access |
| author | Beattie, Tarryn |
| author2 | Hofmeyr, Andre |
| author_browse | Beattie, Tarryn Hofmeyr, Andre |
| author_facet | Hofmeyr, Andre Beattie, Tarryn |
| author_sort | Beattie, Tarryn |
| collection | Thesis |
| description | There is a sizeable economic literature dedicated to understanding trust and the extent to which it influences decision making. Although trust is difficult to measure, experimental economics has commonly used the 'amount sent’ in the Berg, Dickhaut and McCabe (1995) investment game to elicit levels of trust from players of the game. However, there is a growing body of literature suggesting that factors such as risk preferences, altruism, and subjective beliefs may confound this measure of trust, thereby questioning the validity of using the 'amount sent’ to elicit people’s levels of trust. To understand these factors, we designed and conducted an incentive-compatible economic experiment with students from the University of Cape Town. These participants completed the investment game, the dictator game (to measure levels of altruism), and a random lottery pair risk preferences task (to gauge risk preferences). We also included an information treatment where students were shown the conditional distributions of amount sent decisions made by students in the previous, baseline treatment. This was done to evaluate whether knowledge of the actions taken by other students would ground students’ beliefs and influence the decisions they made. We estimate a set of standard statistical models to gauge determinants of the amount sent and a complementary maximum likelihood estimation approach to estimate Expected Utility models and Rank-Dependent Utility models in order to further evaluate our data. Our results show that caution needs to be taken when using the amount sent as a measure of trust as the relationship between risk preferences and the amount sent is a nuanced one. Moreover, altruism has a statistically significant association with the amount sent and with risk preferences. We also found that those who were part of the information treatment sent significantly more than those who were not, and they were on average also less risk averse. This indicates that while subjective beliefs do influence behaviour in the investment game, they also affect risk preferences. Thus, our results suggest that researchers should not use the amount sent in the investment game as a pure measure of trust because its measurement is confounded empirically by altruism and subjective beliefs, and theoretically by risk preferences. |
| format | Thesis |
| id | oai:open.uct.ac.za:11427/31108 |
| institution | University of Cape Town (South Africa) |
| language | eng |
| last_indexed | 2026-06-10T12:32:13.078Z |
| license_str | Not specified — see source repository |
| provenance_str_mv | Harvested via OAI-PMH from UCTD — University of Cape Town Open Access Repository |
| publishDate | 2020 |
| publishDateRange | 2020 |
| publishDateSort | 2020 |
| publisher | School of Economics |
| publisherStr | School of Economics |
| record_format | dspace |
| source_str | UCTD — University of Cape Town Open Access Repository |
| spelling | oai:open.uct.ac.za:11427/31108 Decomposing trust into risk preferences, altruism, and subjective beliefs: An experimental analysis Beattie, Tarryn Hofmeyr, Andre economics There is a sizeable economic literature dedicated to understanding trust and the extent to which it influences decision making. Although trust is difficult to measure, experimental economics has commonly used the 'amount sent’ in the Berg, Dickhaut and McCabe (1995) investment game to elicit levels of trust from players of the game. However, there is a growing body of literature suggesting that factors such as risk preferences, altruism, and subjective beliefs may confound this measure of trust, thereby questioning the validity of using the 'amount sent’ to elicit people’s levels of trust. To understand these factors, we designed and conducted an incentive-compatible economic experiment with students from the University of Cape Town. These participants completed the investment game, the dictator game (to measure levels of altruism), and a random lottery pair risk preferences task (to gauge risk preferences). We also included an information treatment where students were shown the conditional distributions of amount sent decisions made by students in the previous, baseline treatment. This was done to evaluate whether knowledge of the actions taken by other students would ground students’ beliefs and influence the decisions they made. We estimate a set of standard statistical models to gauge determinants of the amount sent and a complementary maximum likelihood estimation approach to estimate Expected Utility models and Rank-Dependent Utility models in order to further evaluate our data. Our results show that caution needs to be taken when using the amount sent as a measure of trust as the relationship between risk preferences and the amount sent is a nuanced one. Moreover, altruism has a statistically significant association with the amount sent and with risk preferences. We also found that those who were part of the information treatment sent significantly more than those who were not, and they were on average also less risk averse. This indicates that while subjective beliefs do influence behaviour in the investment game, they also affect risk preferences. Thus, our results suggest that researchers should not use the amount sent in the investment game as a pure measure of trust because its measurement is confounded empirically by altruism and subjective beliefs, and theoretically by risk preferences. 2020-02-14T07:41:57Z 2020-02-14T07:41:57Z 2019 2020-02-14T07:40:37Z Master Thesis Masters MCom http://hdl.handle.net/11427/31108 eng application/pdf School of Economics Faculty of Commerce |
| spellingShingle | economics Beattie, Tarryn Decomposing trust into risk preferences, altruism, and subjective beliefs: An experimental analysis |
| thesis_degree_str | Master's |
| title | Decomposing trust into risk preferences, altruism, and subjective beliefs: An experimental analysis |
| title_full | Decomposing trust into risk preferences, altruism, and subjective beliefs: An experimental analysis |
| title_fullStr | Decomposing trust into risk preferences, altruism, and subjective beliefs: An experimental analysis |
| title_full_unstemmed | Decomposing trust into risk preferences, altruism, and subjective beliefs: An experimental analysis |
| title_short | Decomposing trust into risk preferences, altruism, and subjective beliefs: An experimental analysis |
| title_sort | decomposing trust into risk preferences altruism and subjective beliefs an experimental analysis |
| topic | economics |
| url | http://hdl.handle.net/11427/31108 |
| work_keys_str_mv | AT beattietarryn decomposingtrustintoriskpreferencesaltruismandsubjectivebeliefsanexperimentalanalysis |