Trusting versus monitoring: an experiment of endogenous institutional choices

Article


Angelovski, A., Di Cagno, D., Grieco, D. and Güth, W. 2019. Trusting versus monitoring: an experiment of endogenous institutional choices. Evolutionary and Institutional Economics Review. 16 (2), pp. 329-355. https://doi.org/10.1007/s40844-019-00126-4
TypeArticle
TitleTrusting versus monitoring: an experiment of endogenous institutional choices
AuthorsAngelovski, A., Di Cagno, D., Grieco, D. and Güth, W.
Abstract

We investigate the problem of deciding between trusting and monitoring, and how this decision affects subsequent behavior, using a laboratory experiment where subjects choose between the Ultimatum and the Yes-No Game. Despite the similarity of the two games in Ultimatum Games responders monitor the allocation proposal, while in Yes-No games responders react without monitoring, i.e. have to rely on trust. We permit either the proposer or responder to make the game choice and analyze how both roles choose between trusting and monitoring, what the ensuing effects of their choices are, and how they vary depending on who has chosen the game. We, also, experimentally vary the cost of monitoring and the responder’s conflict payoff. Since monitoring is usually costly, the amount to share in Yes-No Games (YNG) can exceed that in Ultimatum Games (UG). Regarding the conflict payoff, it can be positive or negative with the former rendering Yes-No interaction a social dilemma. According to our results, proposers (responders) opt for trusting significantly more (less) often than for monitoring. Average offers are higher in Ultimatum than in Yes-No games, but neither UG nor YNG offers depend on who has chosen between games.

KeywordsMonitoring; Trusting; Institutional choice; Ultimatum game
PublisherSpringer
JournalEvolutionary and Institutional Economics Review
ISSN1349-4961
Electronic2188-2096
Publication dates
Online03 May 2019
Print31 Dec 2019
Publication process dates
Deposited25 Nov 2019
Accepted10 Apr 2019
Output statusPublished
Accepted author manuscript
File Access Level
Open
Copyright Statement

This is a post-peer-review, pre-copyedit version of an article published in Evolutionary and Institutional Economics Review. The final authenticated version is available online at: http://dx.doi.org/10.1007/s40844-019-00126-4

Digital Object Identifier (DOI)https://doi.org/10.1007/s40844-019-00126-4
Web of Science identifierWOS:000499752900007
LanguageEnglish
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