CalBusiness

 

Winter 2007

Power of Ideas

Trusting Strangers

Prof. Teck Ho finds trust among strangers gains when stakes grow higher

 

Hoping to show his children a piece of Chinese history, Professor Teck Ho's interest in trust took a personal turn recently when he bought a 120-year-old pipe on the Internet from a seller in China.

 

Ho notes that he had to trust a total stranger across the world to send him the pipe after receiving his money. "It's almost impossible for us not to trust in day-to-day life," says Ho, the William Halford Jr. Family Professor of Marketing.

 

Intrigued by the role of trust in Internet marketplaces, Ho devised a two-player, four-stage laboratory game to test several features of trust among strangers. Among his questions: Do social gains affect trust? Does stake size affect trust? And are there cultural differences of trust?

 

In the US and Singapore, Ho and colleague Keith Weigelt, a professor at Wharton, could afford to hold only low-stakes games, paying players an average of $10 to $15 per hour of play. But thanks to currency exchange rates, they held higher-stakes games in China, awarding winners the equivalent of two months of wages earned by a blue-collar worker.

 

After 386 participants played the game, Ho and Weigelt did not uncover any cultural differences in trusting behavior. But they were surprised to find that players were actually more trusting of each other when the stakes were higher. Ho and Weigelt discuss their results in their article, "Trust Building Among Strangers" (Management Science, April 2005).

 

Ho expected the high-stakes Chinese players to be more tempted to take the money and run rather than trust each other and share their winnings. But that didn't happen.

 

"The results were amazing," says Ho. "In China, the players realized there was a lot more to be gained by trusting and then rewarded each other for their trustworthiness."


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Teck Ho

Teck Ho, William Halford Jr. Family Professor of Marketing

 

"Nurturing individualistic perspectives may be better than having a single corporate-wide direction when it comes to innovation."