COOPERATION BASED ON TRUST - AN EXPERIMENTAL INVESTIGATION

We consider the most basic sequential game, called the 'game of trust' , in which the first mover starts by deciding between cooperation and non-cooperation, whereas the second mover can only react in case of co operation by either exploiting the other player or by dividing the rew ards equally. The unique subgame perfect equilibrium predicts non-coop eration although this is payoff-dominated by fair cooperation. We anal yze experiments by which we want to assess whether there is trust in t he other player's fairness, and, if so, whether it enables mutually be neficial cooperation. When positions were auctioned, there was no trus t. When positions were allocated randomly, the considerably often occu rring trust was rarely rewarded.