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Game Theory Games

Send it, and it grows

Trust Game

You both start with a stake. You may send any amount of yours to a trustee. Whatever you send is multiplied. They then send back as much or as little as they like. Sending is an investment in someone who does not have to repay you.

Berg, Dickhaut, and McCabe's investment game is a sequential social dilemma. Efficiency says send everything: the pie grows. Backward induction says send nothing: the trustee has no reason to return a cent, so the sender should never invest.

In the lab, senders typically pass about half their endowment. Trustees often return enough that the sender at least breaks even, and more when the send was generous. Reciprocity, inequality aversion, and reputational instincts do work that contracts would otherwise do.

The game is useful because it separates trust (the send) from trustworthiness (the return). You can play either seat against a bot that is greedy, fair, or reciprocal.

What theory predicts

A selfish trustee returns nothing. Knowing that, a selfish sender sends nothing. The unique subgame-perfect equilibrium is zero trust and zero reciprocity, even though both would be richer if the sender sent everything and the trustee split the gains.

What people actually do

Senders typically pass about half their stake. Trustees return enough, on average, that senders roughly break even — and often more when the send was generous. Reciprocity, not equilibrium play, is the main story.

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