'Confidentially Yours': Restricting Information Flow between Trustees Enhances Trust-Dependent Transactions

Abstract

By extending the traditional trust game to settings involving more than one trustee, we study how restricting information flow between trustees influences trust and reciprocity. We start with a theoretical investigation and then report the results of two experiments designed to examine investor strategy and trustee behavior. Our results suggest that, compared to when information flow is unrestricted, restricting information flow between trustees leads to the following: (a) total investment is larger, (b) the number of trustees receiving positive investment is about the same, and (c) the investor sends out a larger variety of invested amounts to different trustees.