Houser Paper on Betrayal Aversion Published in “Experimental Economics”

News | December 4, 2012

Professor of Economics and Director of ICES Daniel Houser has a new paper in the latest issue of the journal Experimental Economics.

The article, “What You Don’t Know Won’t Hurt You: A Laboratory Analysis of Betrayal Aversion,” was co-authored with Professor Jason Aimone, a former ICES graduate student and currently a Post-Doctoral Associate at the Virginia Tech Carilion Research Institute (VTCRI) and an Assistant Professor in the Department of Economics at Baylor University.

Abstract:

Recent research argues “betrayal aversion” leads many people to avoid risk more when a person, rather than nature, determines the outcome of uncertainty. However, past studies indicate that factors unrelated to betrayal aversion, such as loss aversion, could contribute to differences between treatments. Using a novel experiment design to isolate betrayal aversion, one that varies how strategic uncertainty is resolved, we provide rigorous evidence supporting the detrimental impact of betrayal aversion. The impact is substantial: holding fixed the probability of betrayal, the possibility of knowing that one has been betrayed reduces investment by about one-third. We suggest emotion-regulation underlies these results and helps to explain the importance of impersonal, institution-mediated exchange in promoting economic efficiency.

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