Presents or investments? An experimental analysis

Individuals frequently transfer commodities without an explicit contract or an implicit enforcement mechanism. We design an experiment to study whethe r such commodity transfers can be viewed as investments based on trust and reciprocity, or whether they rather resemble presents with distributional i ntentions. Our experiment essentially modifies the investment game of Berg, Dickhaut, and McCabe (Trust, reciprocity, and social history, Games Econ. Behav. 10 (1995) 122) by introducing an upper bound to what a contributor c an be repaid afterwards. By varying this upper bound, extreme situations su ch as unrestricted repayment and no repayment (dictator giving) can be appr oximated without altering the verbal instructions otherwise. Our results sh ow that individuals contribute more when large repayments are feasible. Thi s is consistent with the trust and reciprocity hypothesis. Although distrib utional concerns in some contributions can be traced, they are not nearly c lose to a preference for equal payoffs, (C) 2000 Published by Elsevier Scie nce B.V. All rights reserved. PsycINFO classification: 2360 JEL classificat ion: D3; D9.