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Money and trust among strangers

  1. Maria Bigonid
  1. aEconomic Science Institute, Chapman University, Orange, CA 92866;
  2. bDepartment of Economics, University of Basel, CH-4002 Basel, Switzerland;
  3. cDepartment of Economics, Purdue University, West Lafayette, IN 47907; and
  4. dDepartment of Economics, University of Bologna, 40126 Bologna, Italy
  1. Edited by Charles R. Plott, California Institute of Technology, Pasadena, CA, and approved July 27, 2013 (received for review January 31, 2013)

Abstract

What makes money essential for the functioning of modern society? Through an experiment, we present evidence for the existence of a relevant behavioral dimension in addition to the standard theoretical arguments. Subjects faced repeated opportunities to help an anonymous counterpart who changed over time. Cooperation required trusting that help given to a stranger today would be returned by a stranger in the future. Cooperation levels declined when going from small to large groups of strangers, even if monitoring and payoffs from cooperation were invariant to group size. We then introduced intrinsically worthless tokens. Tokens endogenously became money: subjects took to reward help with a token and to demand a token in exchange for help. Subjects trusted that strangers would return help for a token. Cooperation levels remained stable as the groups grew larger. In all conditions, full cooperation was possible through a social norm of decentralized enforcement, without using tokens. This turned out to be especially demanding in large groups. Lack of trust among strangers thus made money behaviorally essential. To explain these results, we developed an evolutionary model. When behavior in society is heterogeneous, cooperation collapses without tokens. In contrast, the use of tokens makes cooperation evolutionarily stable.

Footnotes

  • 1To whom correspondence should be addressed. E-mail: camera{at}chapman.edu.
  • 2Present address: Economic Science Institute, Chapman University, Orange, CA 92866.

  • Author contributions: G.C. and M.C. designed research; G.C. and M.B. performed research; G.C. and M.B. contributed new reagents/analytic tools; M.C. and M.B. analyzed data; and G.C., M.C., and M.B. wrote the paper.

  • The authors declare no conflict of interest.

  • This article is a PNAS Direct Submission.

  • This article contains supporting information online at www.pnas.org/lookup/suppl/doi:10.1073/pnas.1301888110/-/DCSupplemental.

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