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Does competition foster trust? The role of tournament incentives

Published online by Cambridge University Press:  14 March 2025

Steffen Keck  and
Natalia Karelaia
Steffen Keck*
Affiliation:
INSEAD, Boulevard de Constance, 77305 Fontainebleau Cedex, France
Natalia Karelaia*
Affiliation:
INSEAD, Boulevard de Constance, 77305 Fontainebleau Cedex, France
*
Steffen.Keck@insead.edu
Natalia.Karelaia@insead.edu
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Abstract

Members of organizations are often called upon to trust others and to reciprocate trust while at the same time competing for bonuses or promotions. We suggest that competition affects trust not only within dyads including direct competitors, but also between individuals who do not compete against each other. We test this idea in a trust game where trustors and trustees are rewarded based either on their absolute performance or on how well they do relative to players from other dyads. In Experiment 1, we show that competition among trustors significantly increases trust. Competition among trustees decreases trustworthiness, but trustors do not anticipate this effect. In Experiment 2, we additionally show that the increase in trust under competition is caused by a combination of increased risk taking and lower sensitivity to non-financial concerns specific to trust interactions. Our results suggest that tournament incentives might have a “blinding effect” on considerations such as betrayal and inequality aversion.

Keywords

TrustCompetitionTournament incentivesReciprocityBetrayal aversion

JEL classification

C91: Laboratory, Individual Behavior C72: Noncooperative Games
Type
Original Paper
Information
Experimental Economics , Volume 15 , Issue 1 , March 2012 , pp. 204 - 228
Copyright
Copyright © 2011 Economic Science Association

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Footnotes

Electronic supplementary material The online version of this article (doi:https://doi.org/10.1007/s10683-011-9297-1) contains supplementary material, which is available to authorized users.

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