Investor's Pessimistic and False Belief About Trustworthiness and Stake Size in Trust Decision1

Trust is a vital element of any society. Previous studies using trust games have provided insight into understandings of trusting behavior. However, investors' behaviors can be confounded by their risk preferences in the game, and little is known about the relationship between stake size and beliefs of others' good intentions underlying trust. We thus used a variant of the trust game and conducted two experiments to examine how stake size affects investors' beliefs about receivers' trustworthiness, with model-based analyses. We showed that, when holding all else equal, investors trusted more, but their expectations of reciprocation declined as stake size increased. However, actual receivers' reciprocation rates showed the opposite trend to investors' pessimistic beliefs. Furthermore, following previous studies in social psychology, we hypothesized that investors' social preferences (social value orientation) moderated the beliefs underlying trust, but they had no explanatory powers in investors' expectations of reciprocation. These results suggest that peoples' naive beliefs about stake size play a more important role in trust decisions than expected.