Wednesday, April 11, 2012

KECK Steffen, KARELAIA Natalia
Does Competition Foster Trust? The Role of Tournament Incentives Experimental Economics 15, 1 (2012)

Members of organizations are often called upon to trust others and to reciprocate trust while at the same time competing for bonuses or promotions. We suggest that competition affects trust not only within dyads including direct competitors, but also between individuals who do not compete against each other. We test this idea in a trust game where trustors and trustees are rewarded based either on their absolute performance or on how well they do relative to players from other dyads. We find that competition among trustors significantly increases trust. Competition among trustees decreases trustworthiness, but trustors do not anticipate this effect. Our results suggest that competition has a positive effect on trust in the short run but will strongly harm trust relationships in the long-term. As a consequence, in competitive environments trust may be difficult to sustain.