This paper employs a finitely repeated binary investment (trust) experiment to examine the effect of gradualism -- increasing the stake of investment slowly over time rather than requiring a high stake of investment immediately -- in trustor--trustee cooperation building. The experimental results suggest that gradualism helps build high-stake cooperation in the investment relationship: the gradualism treatment induces a higher initial reciprocation rate by the trustee, which leads to a higher rates of subsequent investment from the trustor and successful mutual cooperation between the trustor and the trustee. Our main results are more consistent with a behavioral model with adaptive trustors featuring conditional cooperation, rather than the standard game-theoretic model with both rational trustors and trustees, or a reputation model with two private types (rational or reciprocal) of trustees.
Meeting ID: 979 9331 2909
Pass code: IPE