Trust and Cooperation : Experimental Evidence from Malawi

Abstract

Historically, is has been common to use a so called general social survey (GSS) to investigate trust. Naturally, there are many ways to go about in order to measure the trust of someone. The GSS approach is to simply ask individuals if they trust people or ask them to rate their level of trust. Another form is to represent an agent’s trust through money generating games. This thesis addresses the level of trust revealed through a money generating game known as the trust game and as the investment game. In the trust game the action of player one is interpreted as trust and the action of player two is seen as trustworthiness.

The trust game origins from the field of game theory and is part of a relative new and growing research field in economics known as experimental economics. The trust game is one of the games utilized in the Malawi Land Tenure and Social Capital MLTSC research project. The trust game script is made by Abigail Barr and she has herself analysed the game in the rural parts of Zimbabwe, but the game structure origin from the article by Berg, Dickhaut and McCabe (1995) - Trust, Reciprocity, and Social History.

This paper examines the game theoretical prediction of the trust game. When observing the Malawian trust game outcome it becomes clear that well below ten per cent of the game participants is actually playing the game according to the theoretical game prediction, hence the Nash equilibrium is not satisfied. This finding is in harmony to the findings by both Barr (2003) and Berg et al. (1995). Further, there is argued by the use of various statistical calculations to be large geographical fluctuations with respect to how the game participants are playing the trust game, i.e.: players from different regions and villages play and cooperate differently in the trust game. It is also argued that individuals from poor villages cooperate better in the trust game and they participate more in public cooperative works than players from relatively rich communities.

In this paper there is asked if the behaviour of player two is affected by the action taken by player one. The results are ambiguous. It has proven difficult to establish significant apparent results at the individual level. Nevertheless, it is argued to be a connection between the probability of receiving a high offer and the how much money player one decides to entrust player two and this could to some extent be explained by the inequality aversion of player two in the game.

This paper also examines the observed outcome in the trust game compared to what the players stated about trust before they participated in the game, i.e.: their survey answer versus their game behaviour. The empirical evidence is quite clear; there is a large inconsistency with regards to what the players say concerning trust and how they actually behave in the trust game.