Choosing the agent's group identity in a trust game with delegated decision making

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Authors

Zimper, Alexander
Nicholls, Nicky

Journal Title

Journal ISSN

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Publisher

Wiley

Abstract

Members of a given social group often favor members of their own group identity over people with different group identities. We construct a trust game in which the principal delegates the decision about an investment into a receiver to an agent who either favors the principal's or the receiver's group identity. When choosing the agent's group identity the principal faces a trade‐off between a loyal agent and an agent who might increase the receiver's willingness to cooperate. We solve for the principal's decision in a subgame‐perfect nash equilibrium for the two scenarios of a risk‐neutral and risk‐averse agent, respectively.

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Keywords

Fairness, Identity, In‐group bias, Trust game

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Citation

Zimper A, Nicholls N. Choosing the agent’s group identity in atrust game with delegated decision making. Journal of Public Economic Theory 2020;22:220–244.https://doi.org/10.1111/jpet.12405.