Trust, risk and betrayal

Using experiments, we examine whether the decision to trust a stranger in a one-shot interaction is equivalent to taking a risky bet, or if a trust decision entails an additional risk premium to balance the costs of trust betrayal. We compare a binary-choice Trust game with a structurally identical, binary-choice Risky Dictator game offering a good or a bad outcome. We elicit individuals' minimum acceptable probabilities (MAPs) of getting the good outcome such that they would prefer the gamble to the sure payoff. First movers state higher MAPs in the Trust game than in situations where nature determines the outcome. (C) 2004 Published by Elsevier B.V.