Sorting of trustees: the good and the bad stay in the game

Abstract

We extend the theoretical and experimental analysis of endogenous sorting in social dilemma games to decisions of trustees in trust games. Trustees first decide about the amount they send back if the trustor sends the money and then learn that they can exit the game for a payoff that is identical to the trustor’s endowment. We develop a behavioral model where trustors and trustees have reciprocal preferences, and hence put positive weight on the other player’s payoff if they perceive their behavior as kind. Our model yields two possible constellations: Only trustees with high reciprocity participate, or all types except those with intermediate reciprocity participate. Our data lend strong support for the second pattern, as we observe a U-shaped relation between the trustees’ participation rate and the amount they return. Trustors are hence left with an extreme pool of participants where they are either matched with particularly selfish or generous trustees.