DP9216 Trust, Values and False Consensus

Author(s): Jeff Butler, Paola Giuliano, Luigi Guiso
Publication Date: November 2012
Keyword(s): culture, false consensus, trust, trustworthiness
JEL(s): A1, A12, D1, Z1
Programme Areas: Labour Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=9216

Trust beliefs are heterogeneous across individuals and, at the same time, persistent across generations. We investigate one mechanism yielding these dual patterns: false consensus. In the context of a trust game experiment, we show that individuals extrapolate from their own type when forming trust beliefs about the same pool of potential partners - i.e., more (less) trustworthy individuals form more optimistic (pessimistic) trust beliefs - and that this tendency continues to color trust beliefs after several rounds of game-play. Moreover, we show that one's own type/trustworthiness can be traced back to the values parents transmit to their children during their upbringing. In a second closely-related experiment, we show the economic impact of mis-calibrated trust beliefs stemming from false consensus. Miscalibrated beliefs lower participants' experimental trust game earnings by about 20 percent on average.