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Money and trust among strangers

Camera, Gabriele and Casari, Marco and Bigoni, Maria. (2013) Money and trust among strangers. Proceedings of the National Academy of Sciences of the United States of America, 110 (37). pp. 14889-14893.

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Official URL: http://edoc.unibas.ch/42857/

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Abstract

What makes money essential for the functioning of modern society? Through an experiment, we present evidence for the existence of a relevant behavioral dimension in addition to the standard theoretical arguments. Subjects faced repeated opportunities to help an anonymous counterpart who changed over time. Cooperation required trusting that help given to a stranger today would be returned by a stranger in the future. Cooperation levels declined when going from small to large groups of strangers, even if monitoring and payoffs from cooperation were invariant to group size. We then introduced intrinsically worthless tokens. Tokens endogenously became money: subjects took to reward help with a token and to demand a token in exchange for help. Subjects trusted that strangers would return help for a token. Cooperation levels remained stable as the groups grew larger. In all conditions, full cooperation was possible through a social norm of decentralized enforcement, without using tokens. This turned out to be especially demanding in large groups. Lack of trust among strangers thus made money behaviorally essential. To explain these results, we developed an evolutionary model. When behavior in society is heterogeneous, cooperation collapses without tokens. In contrast, the use of tokens makes cooperation evolutionarily stable.
Faculties and Departments:06 Faculty of Business and Economics > Departement Wirtschaftswissenschaften > Ehemalige Einheiten Wirtschaftswissenschaften > Experimental Makroeconomics (Camera)
UniBasel Contributors:Camera, Gabriele
Item Type:Article, refereed
Article Subtype:Research Article
Publisher:National Academy of Sciences
ISSN:0027-8424
Note:Publication type according to Uni Basel Research Database: Journal article
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Last Modified:12 Dec 2016 11:12
Deposited On:12 Dec 2016 11:12

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