Does Market Crowd Out Trust:An Experimental Investigation
The research question of this paper is:Does the market crowd out people's trust?Which characteristics of the market influence people's trust?Causally addressing these questions requires comparing the differences in trust between environments with and without markets.However,it is difficult to obtain empirical data on the no-market environment.Experimental methods provide a new solution,thanks to a no-market scenario we can simulate in the laboratory.The experimental design faces two challenges.First,what type of game can characterize both the market and trust?We adopt the trust game in experience goods markets,where firms know the quality of the goods they sell,but consumers do not know the quality before purchasing.The information asymmetry makes trust crucial in experience goods markets,which is why we choose it as our baseline game.Second,how can we define the market or characterize its features?We view competition as the core of the market.Based on decentralized mechanism of market rights,we further decompose free competition into two aspects:(1)consumer choice:consumers have the right to freely choose the goods they trade;(2)seller pricing power:sellers in the market have the right to set prices for their goods.Finally,we consider the market narrative as another characteristic of the market.Following the above research pipeline,we use the trust game in experience goods markets as the"market"environment,and create a similar game structure as the"no-market"environment,thereby comparing the differences in trust.The"no-market"environment lacks features such as consumer choice,seller pricing power,or market narrative.We set up treatments that remove single,double,or triple features to analyze the individual and combined effects of market features on trust.We also use within-subject design and data migrating techniques to make sure the decision environment is completely replicated,with only the presence or absence of the market features changing.Our results indicate that the market does not crowd out people's trust.The impact of consumer choice and seller pricing power on trust is asymmetric,with consumer choice playing a crucial role.Additional mediation analysis shows that reputation is an important channel in how market factors determining people's trust.
markettrustmarket narrativesconsumer choiceseller pricing power
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