Abstract

This paper presents the results of some laboratory experiments on the relevance of reputation for the emergence of trust and cooperation in socio-economic interaction. We have extended a repeated investment game adding new treatments where reputation is taken more explicitly into account than in the present literature. We compare treatments where the investor and the trustee rate each other and treatments where the investor and the trustee are rated by a third party. The results show that: (i) reputation impacts the behaviour of individuals even when it has no consequence on their payoffs; (ii) third party reputation positively affects cooperation by encapsulating trust; (iii) some differences in the reputation mechanism can generate different cooperation outcomes. These results have interesting implications on the recent sociological debate on the normative pillars of markets.