Is there any theoretical reason why trustworthiness and risk aversion could be related? What if more trustworthy People (measured by what they Return in trust games) are more optimistic about reciprocal behavior and therefore are also more generous. Would they therefore also be more risk tolerant?
From the logical standpoint, both possibilities suggested by you seem viable. Therefore a test (or a series of tests) should be designed for ruling out one possibility, or showing that both possibilities are relevant.
I think so. If trustworthy individuals are optimistic, as you suggested, they may assign higher subjective probabilities to favourable outcomes. As a result, a trustworthy individual will elicit higher expected utility from a risky prospect and make a choice in favour of a risky prospect.
Perceptions of trustworthiness about us reside in the minds of others. So, I would think that my risk aversion would impact my initial behaviors and decisions in a trust game, which would possibly impact the perceptions others have of my trustworthiness. So, if I am highly risk averse, I am obviously less likely to take a risk in a trust game, at least initially, perhaps leading to lower perceptions of my trustworthiness.
But, keep in mind that risk aversion is generally a stable trait. The decisions I may make in a trust game are dependent not just on my personal traits but also on the actions of the other person and potentially many other factors. So, if I am high on risk aversion but later begin taking greater risks in the game, it is more a reflection on the context than in my personality. So, I am learning more about my partner and those perceptions are shaping my risk taking much more than my personal tendencies, which may become less influential as I am able to assess trustworthiness of my partner.
Thanks for useful comments. I am trying to get my head around the possible mechanisms. I am studying trust in youth groups. Youth members have played the trust game with an unknown member of their own group. I find that individual risk tolerance as well as average risk tolerance are positively correlated with the amounts returned in the trust game. In addition I find a postive correlation between trustworthiness and stated perceived trust level in the group relative to family trust.
As far as trust is concerned, the following papers are recommended. Hopefully the insights/pragmatic views therefrom could help, namely: “to trust is human” (Kramer, 2009); “trustworthiness depends on circumstances” (DeSteno, 2014), etc.
- DeSteno, D. (2014). Who Can You Trust? Harvard Business Review, 92, 3, pp. 112-115.
- Deutsch, M. (1958). Trust and Suspicion. Journal of Conflict Resolution, 2, 4, pp. 265-279.
- Kramer, R. M. (2009). Rethinking Trust. Harvard Business Review, 87, 6, pp. 68-77.
- Lewicki, R. J., McAllister, D. J. and Bies, R. J. (1998). Trust and distrust: New relationships and realities. Academy of management Review, 23, 3, pp. 438-458.
- Newell, S. and Swan, J. (2000). Trust and inter-organizational networking. Human Relations, 53, 10, pp. 1287-1328.
Thanks for these references. The literature indicates that people tend to be too trusting relative to the actual trustworthiness. I tried to get a measure of expected returns in the trust game. They were somewhat correlated with the trusting behavior but less than I had expected. Generosity is the factor that I did not measure directly. Generosity may also explain trustworthiness but how much of it?
Hopefully the insights/relationships between trust and risk/generosity test (vide: Fetchenhauer and Dunning, 2009) as per the following papers could further help:
Ben-Ner, A. and Halldorsson, F. (2010). Trusting and trustworthiness: What are they, how to measure them, and what affects them. Journal of Economic Psychology, 31, 1, pp. 64-79.
Eckel, C. C. and Wilson, R. K. (2004). Is trust a risky decision? Journal of Economic Behavior and Organization, 55, 4, pp. 447-465.
Fetchenhauer, D. and Dunning, D. (2009). Do people trust too much or too little? Journal of Economic Psychology, 30, 3, pp. 263-276.
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