Verified Trust: Reciprocity, Altruism, and Randomness in Trust Games

Behavioral economists have come to recognize that reciprocity, the interaction of trust and trustworthiness, is a distinct and economically relevant component of individual preferences alongside selfishness and altruism. This recognition is principally due to observed decisions in laboratory “trust games”. However, recent research suggests that altruism may explain much of what “looks like” trust in such experiments. We formally derive discriminatory tests for altruism and trust based on withintreatment and within-subject comparisons, and we control for group attributes of experimental subjects. The central idea is to allow for rich and poor trustees, and to examine whether, consistent with dominant altruism, trustors give more to the poor, or whether, consistent with dominant reciprocity motives, trustors give no more to the poor than to the rich. Our results support trust as the dominant motivation for “trust like” decisions, with at most a subsidiary role for altruism. JEL classification: C91, D63, D64