Truly Trustworthy or Simply Strategic? an Examination of Strategic Generosity in the Trust Game

The importance of trust and reciprocity in facilitating mutually beneficial exchange has long been recognized. However, research suggests that the development of trust and reciprocity may be challenging if the actions are considered to be strategically rather than intrinsically motivated. This paper investigates whether initial acts of generosity impact the emergence of trust and reciprocity across strategic and non-strategic settings. Results suggest that when generosity can be perceived as being strategic it induces less trust. As a result, our research suggests that strategic considerations can have a detrimental effect on welfare: earnings within equivalent trust games are lower in the strategic than in the non-strategic condition. Importantly, the observed generosity does not appear to have been strategic. Rather, it appears that simply the perception of strategic motivation is enough to reduce subsequent trust. On the other hand, we also observe that those subjects who acted more selfishly display significantly more reciprocity in the non-strategic relative to the strategic setting. This behavior appears consistent with moral balancing.