New working paper: "Building Trust: The Costs and Benefits of Gradualism"

A new working paper by Wieland Müller on "Building Trust: The Costs and Benefits of Gradualism" (with Melis Kartal and James Tremewan) is available.

A new working paper by Wieland Müller, with Melis Kartal and James Tremewan on "Building Trust: The Costs and Benefits of Gradualism" is available on SSRN.

Abstract

To study the development of trust, we examine a setting with an infinite horizon, uncertainty regarding the trustworthiness of receivers, and various levels of trust. In equilibrium, senders gradually increase trust levels with reciprocating receivers. We find strong experimental evidence of such gradualist strategies. However, comparing this setting to one in which trust is an all-or-nothing decision, we find---in stark contrast to theory---that the latter leads to more efficient outcomes. In a series of follow-up experiments, we highlight the role of homemade beliefs and identify circumstances in which gradual strategies are not only used but also more efficient.