Werner Raub

Embedded trust: Control and learning

This paper discusses two mechanisms through which social embeddedness can affect trust among actors in cooperative relations. Trust can be based on past experiences with a partner or trust can be built on possibilities for sanctioning an untrustworthy trustee through own or third-party sanctions. These two mechanisms are labeled learning and control. The mechanisms are often left implicit or discussed in isolation in earlier research. Learning and control can operate at different levels: at the dyadic level and at the network level. We argue that for understanding trust the two mechanisms should be studied simultaneously, theoretically as well as empirically. We show that this is more easily said than done by addressing some of the theoretical as well as empirical issues. We offer preliminary evidence of the simultaneous working of the learning and control mechanisms at the dyadic level and the network level.

Micro-macro links and microfoundations in sociology

Using Colemans well-known scheme as an anchor, we review key features of explanations of social phenomena that employ micro-macro models. Some antecedents of micro-macro models and of Colemans scheme as well as some paradigmatic examples of micro-macro links are sketched. We then discuss micro-level assumptions in micro-macro explanations and the robustness of macro-level implications to variations in micro-level assumptions. We conclude with an overview of some recent developments in micro-macro modeling and of the contributions to the special issue.

Gains, losses, and cooperation in social dilemmas and collective action: The effects of risk preferences

We address two related issues. First, we analyze the effects of risk preferences on cooperation in social dilemmas. Second, we compare social dilemmas in which outcomes represent gains with dilemmas where outcomes represent losses. We show that predictions on gain‐loss asymmetries with respect to conditions for cooperation crucially depend on assumptions concerning risk preferences. Under the assumption of risk aversion for gains as well as losses together with an assumption of decreasing absolute risk aversion, conditions for cooperation are less restrictive if outcomes represent losses than if outcomes represent gains. Conversely ‐ and counterintuitively ‐ under the assumption of S‐shaped utility, conditions for cooperation are more restrictive if outcomes represent losses than if outcomes represent gains. We provide an experimental test of such predictions. Only a minority of subjects behaves consistent with the assumption of S‐shaped utility. Furthermore, we find no empirical evidence for a general di...

CONTACTS AND CONTRACTS: DYADIC EMBEDDEDNESS AND THE CONTRACTUAL BEHAVIOR OF FIRMS

This chapter addresses social embeddedness effects on ex ante management of economic transactions. We focus on dyadic embeddedness, that is the history of prior transactions between business partners and the anticipation of future transactions. Ex ante management through, for example, contractual arrangements is costly but mitigates risks associated with the transaction, such as risks from strategic and opportunistic behavior. Dyadic embeddedness can reduce such risks and, hence, the need for ex ante management by, for instance, making reciprocity and conditional cooperation feasible. The chapter presents a novel theoretical model generating dyadic embeddedness effects, together with effects of transaction characteristics and management costs. We stress the interaction of the history of prior transactions and expectations of future business. Hypotheses are tested using new and primary data from an extensive survey of more than 900 purchases of information technology (IT) products (hard- and software) by almost 800 small- and medium-sized enterprises (SMEs). Results support, in particular, the hypotheses on effects of dyadic embeddedness.

Testosterone administration modulates moral judgments depending on second-to-fourth digit ratio

Moral judgment involves the interplay of emotions and social cognitions. The male sex-hormone testosterone might play a role in moral reasoning as males are more utilitarian than females in their moral decisions, and high salivary testosterone levels also are associated with utilitarian moral decisions. However, there is no direct evidence for a role of testosterone in moral reasoning. Recent testosterone administration studies show effects on cognitive empathy and social cooperation, which depend on right-hands second-to-fourth (2D:4D) digit ratio, a proxy for prenatal sex-hormone (testosterone-versus-estradiol) priming. Here, in a placebo-controlled within-subjects design using 20 young females we show that 2D:4D predicts 44% of the variance in the effects of testosterone administration on moral judgment. Subjects who show an increase in utilitarian judgments following testosterone administration have significantly higher than average 2D:4D (relatively high prenatal estradiol priming), while subjects showing more deontological judgments following testosterone administration have near-significantly lower 2D:4D (relatively high prenatal testosterone priming). We argue that prenatally-organized differences in aromatase, i.e. conversion from testosterone to estradiol in the brain, might underlie these effects. Our findings suggest that early neurodevelopmental effects of sex steroids play a crucial role in the activational effects of hormones on moral reasoning later in life.

Trust Problems in Household Outsourcing

This article addresses the issue of domestic outsourcing. We view outsourcing decisions as the result of utility-maximizing behavior on the part of households. Earlier studies have shown that households with more time constraints, the most common reason for outsourcing, do not always outsource more. To account for these unexpected empirical findings, we provide a new explanation for outsourcing decisions that focuses on trust problems associated with outsourcing household and caring tasks. Trust problems are related to the competence, values, and possibilities as well as incentives for opportunism on the part of the supplier of the product or service. Using insights from the transaction cost approach, new hypotheses are formulated on the influence of the problem potential on the make-or-buy decision (whether or not to outsource a task). The embeddedness of the supplier is introduced as a way to generate trust, thus decreasing the problem potential.

Trust in triads : an experimental study

Pairs of trustors play finitely repeated Trust Games with the same trustee in a laboratory experiment. We study trustfulness of the trustor and trustworthiness of the trustee. We distinguish between learning and control effects on behavior. Learning effects are related to the trustors information on past behavior of the trustee. Control effects are related to the trustors opportunities for sanctioning a trustee in future interactions. Hypotheses on learning and control effects are derived from backward-looking learning models and from forward-looking models of strategic behavior. The design of the experiment, with respect to trustfulness, allows for disentangling learning effects from a trustors own experience with the trustee and learning effects through third-party information. Also, the design enables disentangling control effects on trustworthiness and trustfulness through a trustors own sanction opportunities and opportunities for third-party sanctions. We find evidence for learning and control effects. The trustors own experiences, the experiences of the other trustor, as well as the trustors own sanction opportunities affect trustfulness. We find evidence for control effects on trustworthiness, including effects arising from opportunities for third-party sanctions. However, there is no evidence for control effects through opportunities for third-party sanctions on trustfulness. This could indicate limited strategic rationality of trustors.

Private ordering: A comparative institutional analysis of hostage games*

Hostage posting (in the sense of pledging a bond) is a commitment device that allows for cooperation of rational actors in economic and social relations with incentive problems, like in the Prisoners Dilemma. This paper provides, first, an informal discussion of hostage posting as a mechanism of cooperatioa We then analyze noncooperative 2‐ and n‐person games with complete information where players can post a hostage prior to their interaction. We compare rather general hostage ‘institutions’ that specify the conditions under which hostages are declared forfeited and, if forfeited, whether the hostages are transferred to another player or are lost. The problem of designing efficient hostage institutions is addressed and solved for 2‐person settings. The minimal institutional requirement for individually rational hostage posting and subsequent cooperation is, roughly, that a players hostage is forfeited if hostages have been posted by everyone and if the player deviates unilaterally from cooperation. Fur...

Die Sozialstruktur der Kooperation rationaler Egoisten. Zur "utilitaristischen" Erklärung sozialer Ordnung

Zusammenfassung Soziale Situationen strategischer Interdependenz, in denen kooperatives Verhalten für nicht durch externe Instanzen eingeschränkte, rationale und egoistische Akteure zwar vorteilhaft, jedoch schwierig zu erreichen ist, treten in vielen Zusammenhängen auf. Klassisches Beispiel ist Hobbes’ Problem der sozialen Ordnung. Weitere zentrale Beispiele sind bestimmte wirtschaftliche und „soziale“ Austauschbeziehungen oder solidarisches Verhalten in Gruppen. Im ersten Teil des Beitrags werden „problematische“ Situationen dieser Art und die bei ihrer theoretischen Analyse auftretenden Erklärungsprobleme genauer charakterisiert. Der zweite Abschnitt enthält spieltheoretischer Untersuchungen. Aus deren Ergebnissen lassen sich qualitative, im Prinzip empirisch prüfbare Aussagen über sozialstrukturelle Bedingungen der Kooperation herleiten. Diese Bedingungen für kooperatives Verhalten in problematischen Situationen werden im dritten Abschnitt diskutiert. Man kann den Beitrag als einen Schritt auf dem Weg zu einem Nachweis dafür sehen, daß das Problem der sozialen Ordnung im Rahmen eines „utilitaristischen“ Erklärungsansatzes rationalen Handelns lösbar ist.

Hostage Posting as a Mechanism of Trust Binding, Compensation, and Signaling

We study voluntary hostage posting - pledging a bond - as a commitment mechanism promoting trust, including trust in economic exchange. A hostage can promote trust by binding the trustee through reducing his incentives for abusing trust, by providing compensation for the trustor in case trust is abused, and by serving as a signal for the trustor about unobservable characteristics of the trustee that are related to the trustee’s opportunities and incentives for abusing trust. We provide an integrated model that allows for a simultaneous analysis of how hostages promote trust through binding, compensation, and signaling. We model hostage posting as a mechanism of trust using a game with incomplete information and uncertainty. Our theorems provide conditions for equilibria such that a hostage is posted by the trustee and induces the trustor to place trust that is subsequently honored by the trustee. The article shows that equilibrium selection problems are not severe: the equilibria are unique or there are only few other equilibria with less appealing properties. Hence, the results can be used for predictions on trust based on hostage posting among rational actors.