Ragan Petrie in June 2011 AER

Feature Story, News | July 1, 2011

Do people value face-to-face contact when conducting business transactions and other interactions? Ragan Petrie and Catherine C. Eckel investigate this question in the latest issue of the American Economic Review.

In “Face Value,” Ragan Petrie (Associate Professor of Economics at ICES and the Department of Economics at George Mason University) and Catherine C. Eckel (Ashbel Professor of Economics and Political Economy, University of Texas at Dallas) used controlled laboratory experiments to investigate whether participants in a trust game use information gained from photographs of their counterparts in their decision making. Petrie and Eckel also investigated if subjects were willing to pay to have their counterpart’s photograph revealed. Their results show that participants are willing to pay to have their counterpart’s photograph revealed and efficiency is improved.

Abstract:

People pay attention to the appearance of others, and personal characteristics can affect many types of decisions. We ask, is there informational value in a face in a situation where trust and reciprocity can increase earnings? We use a laboratory trust game experiment where subjects are unable to observe a counterpart, must observe a counterpart, or can pay to reveal a counterpart’s photograph. Both senders and responders are willing to pay to observe the photos, and we show that behavior, earnings, and efficiency are affected. When subjects are “face to face,” efficiency is enhanced, and senders have higher earnings.

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