Trust Game

Charles Holt

Welfare Economics: Allocative Efficiency, Externalities, Fairness, Altruism

Experiment Software

This program runs a set of two-person "trust games". The first mover decides how much money to pass to the second mover. All money passed is increased by a factor, M > 1, and the second mover then decides how much of this to return to the first mover. The Nash equilibrium for selfish preferences is to pass nothing, since a self-interested person would return nothing in the final stage. The game highlights issues of reciprocity and strategy.