Working Paper: NBER ID: w18460
Authors: jeffrey butler; paola giuliano; luigi guiso
Abstract: Trust beliefs are heterogeneous across individuals and, at the same time, persistent across generations. We investigate one mechanism yielding these dual patterns: false consensus. In the context of a trust game experiment, we show that individuals extrapolate from their own type when forming trust beliefs about the same pool of potential partners - i.e., more (less) trustworthy individuals form more optimistic (pessimistic) trust beliefs - and that this tendency continues to color trust beliefs after several rounds of game-play. Moreover, we show that one's own type/trustworthiness can be traced back to the values parents transmit to their children during their upbringing. In a second closely-related experiment, we show the economic impact of mis-calibrated trust beliefs stemming from false consensus. Miscalibrated beliefs lower participants' experimental trust game earnings by about 20 percent on average.
Keywords: No keywords provided
JEL Codes: A1; A12; D01; Z1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| trustworthiness (Z13) | belief errors (B00) |
| belief errors (B00) | earnings (J31) |
| trustworthiness (Z13) | trust beliefs (Z13) |
| false consensus (D70) | earnings (J31) |
| initial trustworthiness (D83) | trustworthiness (Z13) |