Trust Building in the U.S. and Japan: Evidence from Experimental Research

1. Trust Building in the U.S. and Japan: Evidence from Experimental Research Coye Cheshire, PhD School of Information Management and Systems UC-Berkeley

2. Experiments conducted with researchers at Stanford University and Hokkaido University • Karen S. Cook (Stanford) • Robin Cooper (Stanford) • Toshio Yamagishi (Hokkaido) • Shigeru Terai (Hokkaido) • Rie Mashima (Hokkaido) • Masafumi Matsuda (Hokkaido)

3. Overview • Background of Issues on Trust, Uncertainty and Commitment • Two Recent Experimental Studies • Key Findings and Implications

4. What is ‘Trust Building’? • The process through which social interaction opportunities involving risk are transformed into relations in which the people involved come to trust each other and honor that trust.

5. Uncertainty and Networks of Trust Relationships • Uncertainty leads to commitment between exchange partners • Commitment involves longer-term exchange relations and can lead to trust • Trust networks can form as a result, especially under conditions of uncertainty and risk

6. Link of Uncertainty to Commitment • Cook and Emerson (1978, 1984) • Kollock (1994) – “rice and rubber markets” uncertainty re: quality led to commitment • Yamagishi, Cook and Watabe (1998) – results from U.S. and Japan, avoidance of risk and uncertainty led to commitment

7. Yamagishi, Cook and Watabe (1998)

8. How Does ‘Trust Building’ Happen? “The process through which social interaction opportunities involving risk are transformed into relations in which the people involved come to trust each other and honor that trust.”

9. Trust Building in U.S. and Japan: Experiment Description (Experiment 1) • Cross-Cultural Examination of Trust and Cooperation • Experiments conducted separately in U.S. and Japan

10. Experiment Overview • Four subjects in each experimental group, each subject sits alone at her own computer. • Subjects informed that they should try to earn points, points translate to money.

11. Experiment Overview (continued) • The “Games”: • Standard Prisoner’s Dilemma (PD) • Prisoner’s Dilemma with Choice of Dependence (PD/D) • Allows participants to “entrust” 1-10 coins to a partner (signaling of trust) • If partner returns the coins, they double in value (cooperation) • Or, partner can simply keep the entrusted coins (defection)

13. Cook, Yamagishi, Cheshire et al., 2005: Cooperation Behavior in Fixed versus Random Partner Exchange

14. Cook, Yamagishi, Cheshire et al., 2005: Entrusting Behavior in Fixed versus Random Partner Exchange

15. Summary of Results • The opportunity to choose the level of risk involved in trusting another helps to improve the level of mutual cooperation for American and Japanese participants. • American participants engage in higher levels of risk-taking than the Japanese participants. • Allowing participants to decide on the level of risk to take on their partner was much weaker when it was not possible to build a relationship with a particular partner (i.e., fixed versus random-partner conditions). • Americans took more risks and trusted their partners more than did the Japanese– even in the random-partner exchanges.

16. Experiment 2: In-group / Out-group Experiment • Direct Exchange between U.S. and Japanese Subjects

17. Overview of in-group / out-group Experiment • People have a tendency to develop mutually cooperative relations with in-group members. • We examined whether people have a tendency to punish in-groupmembers as well. • To examine this, we conducted an Internet experiment, in which Japanese and Americans participated simultaneously.

18. Experiment Setup • Hokkaido Univ. lab. and Stanford Univ. lab. were connected with each other through the Internet. • Japanese and Americans participated in our experiment simultaneously and engaged in real-time interaction. • Four Japanese and 4 Americans participated in one experimental group (total of 8 subjects per session). We ran 9 groups.

19. Experimental Task (1) • Participants play a cooperation game and a punishment game in each of 24 trials. Cooperation Game • Each participant is endowed with 100 points, and decides (1) to give to either a Japanese or an American and, (2) how much of the 100 points to give to that person. • The recipient of the money receives twice as many points as the participant gave.

20. Experimental Task (2) Punishment Game • In each trial, each participant is endowed with 50 points for punishment. • Each participant monitors either a Japanese or an American participant, and decides whether or not and how strongly to punish the monitored person.

21. Experimental Task (3) • Punishment is costly. • Each participant pays points (out of the 50 points) to punish a monitored person. The more points a participant pays to punish someone, the stronger the punishment is. Three times as many points as the participant paid for punishment is subtracted from the punished person’s earnings. • At the end of the experiment, participants were paid real money in proportion to his/her “points” gained in the experiment. (100 points = $0.3)

22. In Out In Out Results (Cooperation Game) • Choosing who to give to: • Japanese participants gave money more frequently to out-group members than to in-group members. (34.8%, t(35）=2.18, p < .05) • American participants gave money equally to in-group and out-group members. (48.7%, t(35）=1.55, ns. ) • The difference between Japanese and Americans is significant. (F(1, 68)=6.94, p < .05)

23. In Out In Out Results (Cooperation Game) • How Much to Whom • Japanese participants tended to give more money to out-group members than to in-group. (Japanese: 35.6, t(35）=1.80, p < .10) • Americans gave about equally to the two groups.(Americans: 49.8, t(35）=1.69, ns.) • The difference between Japanese and Americans is significant. (F(1, 68)=7.45, p < .001)

24. Out In Out In Results (Punishment Game) • Monitoring • Both Japanese and American participants monitored in-group members than out-group members. (Japanese: 53.4%, t(35）=87, p < .05) (Americans: 55.4%, t(35）=3.54, p < .05） • The difference between Japanese and Americans is not significant. (F (1, 68)=.74, ns.) • 44.1% • 41.8%

25. Out In Out In Results (Punishment) • How Much to Punish • Japanese participants paid about equal money for punishing in-group and out-groups. (Japanese: 50.3%, t(25）=.87, ns.) • American participants paid more money for punishing in-group members than out-group members. (Americans: 61.0%, t(31）=2.67, p < .05） • The difference between Japanese and Americans is not significant. (F (1, 52)=.77, ns.)

26. Is punishing a form of cooperation? • Positive correlation between cooperation level (the total amount of points given) and punishment level (the total amount of points used for punishment). (Japanese: .35, p < .05; Americans: .56, p < .001; Spearman) • Cooperators in the cooperation game punished non-cooperators but not cooperators. (Positive correlation between the cooperation level and the tendency to punish particularly non-cooperators.) (Japanese: .37, p < .05; Americans: .39, p < .05; Spearman)

27. Summary of the Results • Both Japanese and Americans chose more in-group members to monitor. • Cooperators in the cooperation game tended to punish non-cooperators. • Japanese participants tended to give more money to Americans than to Japanese.

28. Conclusions and Implications From Both Studies • (1) we must be careful to distinguish between cooperative behavior and trusting behavior. • (2) risk-taking sometimes works differently among Americans than among Japanese individuals, which leads to different outcomes for trust-building. • (3) in-group and out-group cultural identities can influence the development of commitment formation and trusting behavior.