Podcast Insight In Person

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Rationality suggests that trust should build slowly and that people should proceed cautiously when building a relationship. But what if you only have one chance to decide whether to trust someone? In that case, caution might be a poor choice: it can be perceived as distrust and thus reduce the possibility of engendering trust. To investigate this, J. Keith Murnighan of the Kellogg School of Management, with Madan M. Pillutla (London Business School) and Deepak Malhotra (Harvard Business School), performed two experiments using the Trust Game. In the Trust Game, a player (Player 2) decides whether and how much to reciprocate when given money by an anonymous person (Player 1), with both players knowing that however much Player 1 sends, Player 2 gets triple that amount.

Game theory, which analyzes the best courses of action in competitive situations, predicts that Player 1 will send no money because of the risk of getting nothing back, even though sending nothing sacrifices the benefits that come from tripling the amount sent. For both players to obtain these benefits, Player 1 must bear the risks, with rational models of trust development suggesting that initial risks taken be relatively small. If the acts of trust are too small, however, then they may not be recognized as trust and they might even anger Player 2s who expect Player 1s to see the benefits of sending more.

Precipitous acts of trust, which on the surface may seem irrational, can accelerate trust development.Earlier studies of the relationship between trust and reciprocity often used Prisoner’s Dilemma games in which the rational, short-term strategy is for a prisoner to confess. This leads to a better outcome regardless of their partner’s choice. But if both use this logic and confess, both prisoners go to jail for a much longer period than they would if they both kept quiet. Keeping quiet leads to the most efficient outcome and depends on the prisoners trusting each other. When the players know they will see each other in the future, the cooperative outcome becomes more likely.

Trust and Reciprocity

In Pillutla, Malhotra, and Murnighan’s experiments, players had only one interaction, giving them no opportunity for reputation building. Participants, all Player 2s, were told that an anonymous player (Player 1) could send them any portion of a fixed amount of money ($10 or $20), and they would actually receive three times the money sent. Thus, if Player 1 sent $5, Player 2 received $15. Player 2 then decided how much, if anything, to return to Player 1. The investigators experimentally manipulated the amounts (from $2 to the entire amount) sent by Player 1.

Feelings of obligation or indebtedness might compel Player 2 to return some money, especially if Player 1 chose to send all or most of their money. By setting up the experiments so Player 2 could receive more or less than the amount Player 1 retained, the authors could directly examine the influence of the amount sent on feelings of obligation as well as actual reciprocity.

Player 1s in the Trust Game face a difficult choice: the more they send, the more they risk, because Player 2 is not required to return any money. Thus, Player 1s must balance their risks with their expectations that Player 2s will reciprocate; if Player 2s do not reciprocate, any money sent is lost. Murnighan and his co-authors speculated that with maximal trust—sending everything—Player 2s would feel a strong sense of obligation, reciprocity would be the greatest, and non- reciprocation would be least likely. After the experiment, participants responded to a questionnaire concerning their feelings about Player 1s, the amount they returned, and the characteristics they attributed to Player 1s.

Greater Trust, Greater Returns

Both experiments showed that reciprocity increased as the money sent increased: sending more increased reciprocity. When Player 2s could achieve equal outcomes (because Player 1s sent them enough), 80 percent of the recipients returned just enough to equalize the two players’ final outcomes. Although maximal trust actually did not increase the likelihood of reciprocity, it did increase the chance that—when players did reciprocate—they would return an amount that equalized returns. And when Player 1s only sent small amounts, recipients frequently returned nothing. Feelings of obligation completely explained the relationship between the amounts sent and returned: larger amounts sent led to greater feelings of obligation and greater returns. Also, after playing the Trust Game, Player 2s viewed Player 1s who sent more money as more trusting and more intelligent.

The results contrast markedly with rational prescriptions for trust development which favor caution. Instead, these findings indicate that precipitous acts of trust, which on the surface may seem irrational, can accelerate trust development. Precipitous acts of trust do entail risk, as evidenced by the frequent instances of zero returns. According to Murnighan, “There may be too much risk and very little payoff for sending a lot of money.” Nevertheless, the amounts returned were higher for maximal and almost-maximal trust. From a societal standpoint, the authors conclude, “Sending everything maximizes joint outcomes, and, if reciprocity could be guaranteed, might increase Player 1 outcomes by as much as 50 percent.” People who exhibited more trust and took greater risks benefited more—in this case monetarily—and people who exhibited less trust and took smaller risks often missed a golden opportunity.