Trust, Reciprocity and Institutional Design: Lessons from Behavioural Economics

Trust and reciprocity are the bond of society (Locke), but economic agents are both self-interested and intrinsically untrustworthy. These assumptions impair severely economists' accounts of social relationships. The paper examines strategies to escape this paradox by enlarging our conception of rationality: the assumptions of self-interest and consequentialism are critically discussed as well as relational behavioural principles (e.g. trust and reciprocity). The implications of this enlarged kind of rationality are particularly important for agency theory. The paper analyses, within this framework, the working of two different kinds of incentive mechanisms, namely intra-personal and interpersonal, and discusses experimental results that emphasise the empirical relevance of the latter. Besides providing a more descriptively adequate picture of agency, such mechanisms have important normative implications. In this respect some of the conditions that affect the process of accumulation and erosion of trust and social capital are explored. The tension between rules and trust turns out to be not inescapable, though it calls for a changing in the designing logic of institutions and contracts. I shall discuss what are the changes needed in order to implement a trust-enhancing activity of institutional design.Incentives; reciprocity; trust; crowding-out; institutional design

To Give or Not To Give? Equity, Efficiency and Altruistic Behavior in a Survey-Based Experiment

This paper presents the results of a survey-based experiment on the role of equity and efficiency for altruistic behavior. Using simple binary decisions for a representative pool of subjects, we find that both equity and efficiency are relevant for the decision to give. However, contrary to the findings in several laboratory experiments, our results indicate that equity plays a major role for altruistic behavior. Differences in relative payoffs have a significant effect on the decision to give. When giving is not costly, more than half of the subjects prefer equal payoffs to a socially efficient but unequal allocation. When giving is Pareto-improving, half the subjects choose to sacrifice a higher payoff in order to avoid payoff inequality. We also find that preferences, as revealed by experimental choices, are largely consistent with reported pro-social activities, while only weakly related to self-reported well-being.Altruism, Inequality-Aversion, SocialWelfare, Envy, Large-Scale Experiment

Motivazioni, Procedure e Filtri: strumenti innovativi di sviluppo organizzativo

The paper discusses the theoretical foundations of an incentive provision system based both on material and immaterial (moral and social) incentives. We focus on the normative implications streaming from an enlargement of the idea of rationality traditionally applied to the analysis of strategic choices: when self-interest, in fact, is supplemented with behavioral principles such as reciprocity, trust, altruism and intrinsic motivation, the way incentives have to be designed and provided should change consequently. We first describe the functioning of such principles and then analyze in some depth the way those factors can be used to favor an efficient matching between principal and agents endowed with functional preferences in presence of asymmetric information. Such an efficient matching produces positive effects on the effort provided by agents which, in turn, positively affects organizational efficiency. This process applies with particular cogence to economic environments characterized by vocational workers (civil economy), where intrinsic motivations are a crucial determinant of workers morale. Those settings are affected by social strategic complementarity that may yield to pareto-rankable multiple equilibria. We introduce instruments that should favor the functioning of the matching process and advocate their implementation to foster an internally-driven sectorial development process.Fallimenti del Mercato; Fallimenti Stato; economia civile; Incentivi relazionali; Giustizia distributiva; avversione iniquita'

Il limite permeabile. La costruzione di uno spazio intersoggettivo condiviso nelle relazioni strategiche

This article focuses on the relational aspects of strategic interactions. First, we highlight how some of the limitations of the classical theory of games can hinder a deeper understanding of two fundamental dimensions of interpersonal relations, which are essential to our social epistemology: the mentalizing and empathizing processes. Secondly, we present the results of a series of experiments that stress the role of these two elements in the realm of strategic interactions. Finally, we argue that, by conceptualizing a hierarchy of higher order beliefs, psychological game theory seems to constitute a promising step forward towards the introduction of relational elements in the motivational structure of social agents and in the understanding of the intersubjective space we build and share when interacting with others

Empathy, Guilt-Aversion, and Patterns of Reciprocity

This paper reports the results of an experiment aimed at investigating the link between empathy, anticipated guilt, and pro-social behavior. In particular, we test the hypothesis that empathy modulates the anticipatory effect of guilt in bargaining situations and, more specifically, that it correlates with subjects' willingness to give and to repay trust in an investment game. We also control for the effect of individual risk attitude. Our main results show that empathy significantly influences players' pattern of restitution in the investment game and that risk-propensity weakly affects the decision to trust; we also find a significant gender difference in the distribution of empathy. These results seem to indicate that empathy affects pro-social behavior in a more complex way than previously hypothesized by existing models of social preferences

We can be heroes: trust and resilience in corrupted economic environments

We use an original variant of the standard trust game, in order to study the effect of corruption on trust and trustworthiness. In this game, both the trustor and the trustee know that part of the surplus they can generate may be captured by a third “corrupted” player under different expected costs of audit and prosecution. We find slightly higher trustor’s giving in presence of corruption, matched by a significant effect of excess reciprocity from the trustee. Both the trustor and the trustee expect on average corruption acting as a tax, inelastic to changes in the risk of corruptor audit. Expectations are correct for the inelasticity assumption, and for the actual value of the “corruption tax”. Our experimental findings lead to the rejection of four standard hypotheses based on purely self-regarding preferences. We discuss how the apparently paradoxical excess reciprocity effect is consistent with the cultural role of heroes in history where examples of commendable giving were used to stimulate emulation of the ordinary people. Our results suggest that the excess reciprocity component of the trustee makes trustor’s excess giving a rational and effective strategy

Trust and trustworthiness in corrupted economic environments

We use an original variant of the standard trust game to study the effects of corruption on trust and trustworthiness. In this game, both the trustor and the trustee know that part of the surplus they can generate may be captured by a third “corrupted” player under different expected costs of audit and prosecution. We find a slightly higher trustor’s giving in the presence of corruption, matched by a significant excess of reciprocity from the trustee. Both the trustor and the trustee expect, on average, corruption to act as a tax, inelastic to changes in the probability of corruption prosecution. Expectations are correct for the inelasticity assumption and for the actual value of the “corruption tax”. Our experimental findings lead to the rejection of four standard hypotheses based on purely self-regarding preferences. We discuss how the apparently paradoxical excess reciprocity effect is consistent with the cultural role of heroes in history, where examples of commendable giving have been used to stimulate emulation of ordinary people. Our results suggest that the excess reciprocity component of the trustee makes the trustor’s excess giving a rational and effective strategy

How to incentive Who? Intra-personal and inter-personal mechanisms

The paper focuses on the working of incentives both in parametric and strategic situations. It challenges some of the basic assumptions of the traditional model of economic agent which is usually assumed as self-interested and consequentialist. Psychological researches have stressed the descriptive limitations of that model and pointed out the relevance of other behavioral principles. Intrinsic motivations, reciprocity and trust being the most prominent among them. The paper analyses two different kinds of incentive mechanisms, namely, intra-personal and inter-personal and presents the results of an experiment that emphasize the empirical relevance of the latter. Besides providing a more descriptively adequate picture of interactive agency, such mechanisms have important normative implications that are discussed in the closing section

Lab-sophistication: does repeated participation in laboratory experiments affect pro-social behaviour?

Experimental social scientists working at research-intensive institutions deal inevitably with subjects who have most likely participated in previous experiments. It is an important methodological question to know whether participants that have acquired a high level of lab-sophistication show altered pro-social behavioural patterns. In this paper, we focus both on the potential effect of the subjects’ lab-sophistication, and on the role of the knowledge about the level of lab-sophistication of the other participants. Our main findings show that while lab-sophistication per se does not significantly affect pro-social behaviour, for sophisticated subjects the knowledge about the counterpart’s level of (un)sophistication may systematically alter their choices. This result should induce caution among experimenters about whether, in their settings, information about lab-sophistication can be inferred by the participants, due to the characteristics of the recruitment mechanisms, the management of the experimental sessions or to other contextual clues

Investigating the Role of the Human Element in Maritime Accidents using Semi-Supervised Hierarchical Methods

Navigation safety is a priority both at European and global level. Despite the important progress made over the years, sea accidents remain a major concern and much work is still needed to enhance maritime safety. Knowing the causes and precursors of past accidents is essential to identify the elements on which to intervene to improve safety and reduce the possibility of an accident to occur again. In this study, 1.079 sea accidents from the International Maritime Organization (IMO) database are analyzed using Semi-supervised Recursively Partitioned Mixture Models in an attempt to identify and categorize causal themes from accident data. Special attention is devoted to the human element, which is widely recognized as a primary or precursory cause in most accidents