We examine the prevalence of gradualist strategies and their effect on trust-building and economic gains in a setting with an infinite horizon, asymmetric information regarding the trustworthiness of receivers, and various levels of trust. The theoretical literature suggests that gradualist strategies mitigate asymmetric information problems and foster trust-building. However, we theoretically and experimentally show that gradualism sometimes reduces joint payoffs relative to a simple “binary” setting in which trust is an all-or-nothing decision. In a series of experiments, we vary the degree of asymmetric information as well as the economic returns to trusting behavior, and delineate circumstances under which gradualism may promote or curb efficiency.
|Pages (from-to)||258 - 275|
|Journal||Games and Economic Behavior|
|Publication status||Published - 2021|
Austrian Classification of Fields of Science and Technology (ÖFOS)
- 502027 Political economy
- 502024 Public economy