Running head: EMPATHY, PERSPECTIVE-TAKING AND TRUST

Trust is a necessity in every day live and affected by various features of the trust interaction. The current study investigates the effect of empathy and perspective-taking on trust decisions via a trust game (experiment 1) and an investment game (experiment 2). The effects of empathy and perspective-taking were not tested prior to the present research. Therefore, the main research subject concerns the effect of empathy and perspective-taking on trust, but exploratory detours are taken to identify conceivable causes that drive these effects. Two experiments tested the effects of empathy and perspective-taking on trust and found mixed-results. Experiment 1 found that empathy leads to an increase in trust and that perspective-taking can lead to both an increase and decrease in trust based on the tendency to feel affiliated. Experiment 2 was incapable of replicating these results in an investment game, but contributed to the research by investigating who is preferred when playing the investment game; male or female trustees. Results suggested that women prefer female trustees, but men do not have a preference. EMPATHY, PERSPECTIVE-TAKING AND TRUST DECISIONS 3 The Effects of Empathy and Perspective-Taking on Trust Decisions Almost everybody can think of a situation where a bullying child is asked to imagine how they are making their victim feel. Likewise, we can probably think of a conflict situation in which were advised to try and see the others point of view. Employees receive identical instructions when they are settling an agreement with a competing party and for a good reason. People tend to not consider another’s view when making a trust or cooperation decision, while taking the other’s view should improve decision making (Malhotra, 2004; Evans & Krueger, 2011). Research has suggested that taking another’s perspective enhances conflict resolutions (Paese & Yonker, 2001) and improves negation results by uncovering hidden agreements and avoiding impasses (Galinsky et al., 2008; Trötschel et al., 2011). In this research we will explore if this assumption is true for trust. So, does taking the viewpoint of the other party improve trust decisions? And when is it smarter to use your brain (perspective-taking) and when is it smarter to use your feelings (empathy) to reach an improvement of trust? No prior research has addressed the question if empathy and perspective-taking effect trust decisions, but prior research has suggested that empathy and perspective-taking effect a variety of other social interactions. Due to the relative novelty of the topic, the current research will contain both hypothised and exploratory elements. In the following sections of the introduction, we will first discuss the meaning of trust, the measurement of trust and when we trust. Secondly, we will discuss the fault of not considering the other party in decision making and the expected effect of empathizing and perspective-taking. Trust and the trust game EMPATHY, PERSPECTIVE-TAKING AND TRUST DECISIONS 4 Trust is considered an important contributor of cooperation (Parks, 1994) and a necessity in everyday life. The short-lived relationship of buyer and seller is based on trust. For example, when buying a product in an online webshop, you trust that the distributer transfers your product with care. Or, when you are trying out the newest tablets in a tech store the personnel trusts that you handle their product with discretion. We trust others in order to obtain goods or services we cannot provide ourselves. People need trust. Therefore, trust is a well-covered topic in psychological literature. Trust has been defined across different fields of science and is at times perceived as too chaotic and untestable, because the definition of trust lacks clarity (Mayer, Davis & Schoorman, 1995). Nonetheless, two consistent factors are found in all definitions; a willingness to be vulnerable or to take risk. In the present research trust is defined as a willingness to be vulnerable to exploitation with the expectation of a benefit (Rosseau et al., 1998) and measured by the trust game. The most prominently used tool to measure trust is the trust game. It is most frequently used by both psychologists and economists (Evans & Krueger, 2009). The trust game is played by two players and is illustrated in figure 1. Player 1, the so-called trustor, will first decide to trust or distrust. Deciding to distrust finishes the game and both players receive their monetary endowment (A>B). If Player 1 decides to trust, Player 2 (trustee) has to decide to reciprocate or betray Player 1. Reciprocating will give both players a fairly equal amount of money (C), but betrayal will benefit Player 2 (E>D). In the trust game the value of payoff is ordered as E>A>C>B>D. The present research focuses on the role of the trustors and their trust decisions. EMPATHY, PERSPECTIVE-TAKING AND TRUST DECISIONS 5 Figure 1 Visualization of the Trust Game The trust game paradigm is primarily used by researches since it creates an extreme trust situation. The sequential and anonymous format cause all decisions to be based on expected motives and incentives. In this way trust decisions cannot be explained by expected capabilities of the other player, since no information concerning capabilities are included in the game. Egocentric views and trust dilemmas The body of research concerning determinants of trust has developed various theories. Game theory predicts that in the trust game paradigm endowments will not be shared based on the selfishness and pure rationality assumption. Both trustee and trustor are self-interested and focused on pay-off. The trustee will keep all the received money and the rational trustor will anticipate the behavior and not send money (von Neumann & Morgenstern, 1947). However, people playing the game do trust each other. Trust only seems to happen under certain circumstances. The question that emerges is: When do people decide to trust? What conditions are needed in order to trust one another? The definition of trust, as formulated by Rosseau (1998), states that the expectation to reciprocate and risk are large contributors to trust. A large body of research supports this EMPATHY, PERSPECTIVE-TAKING AND TRUST DECISIONS 6 definition and prove that people trust only when they expect others to reciprocate (Gneezy, Guth & Keren, 2000; Snijders & Keren, 1999). Other scientists debate that the effect of expectation is not as large as psychological research might depict. For example, Dunning et al. (2011) found that people only trust when the expectation to reciprocity meets or exceeds their level of risk. Thus, people trusted more than their expectation thresholds predicted. However, in this experiment 35% would still decide to trust someone even when the expectation of reciprocity suggest not to. Based on these findings, one can suggest that expectations have an effect on trust, but it remains unclear to what extent. The willingness to take risks is a major contributor to trust, but only for trustors. Research suggests that when risk increases, trust decreases (Evans & Krueger, 2011; Malhotra, 2011). Also, the trustees trust decisions are not sensitive to risk, but are depended of the benefit provided by the trustor, the level of fairness and the temptation to defect (Malhotra, 2011; Falk & Fishbacher, 2006; Snijder & Keren, 1999). Temptation to defect, or betray, is defined by the difference in pay-off between betrayal and reciprocity. The temptation to defect increases when the pay-off for betrayal is significantly beneficial compared to the pay-off for reciprocity for the trustee. Evans & Krueger (2011) showed that trustors do not review the temptation to defect when their risk is high, but base their decision to trust on their risk alone. Trustors only review the level of temptation if risk does not surpass a certain threshold and decide to trust when the temptation to defect is high. Trustors should exclude themselves from their egocentric views and consider taking the perspective of the trustee in the high risk games then they recognize that the probability of betrayal is minimal. Unfortunately we regularly fail to exclude ourselves from our own perspectives, since we find it easier to review information that is relevant to ourselves. Gilovich et al. (1999) state that EMPATHY, PERSPECTIVE-TAKING AND TRUST DECISIONS 7 egocentrism makes it difficult to remove oneself from our own view. We rather focus on information that is salient and simple to process and usually that is information relevant to ourselves (Hastie & Dawes, 2010; Alicke et al., 2005). Egocentric views have proven to carry detrimental consequences in trust. Perspective-taking would be beneficial for both parties, since trust (and reciprocity) would benefit equity. These findings suggest that trust decisions should improve if trustors consider the view of the trustee. The present research tests if taking the perspective of the trustee improves trust decisions. Does trust increase when we take the trustee’s perspective? People can use different tactics of taking another person’s view such as perspective-taking and empathy. Empathy is an instant affective reaction and can increase prosocial behavior, while perspective-taking is a cognitive capacity and does not necessarily increase prosocial behavior (Davis, 1985). Perspective-taking and empathy can co-occur and are both often used interchangeably. However, in the present research the effects of both empathy and perspective-taking on trust will be tested seperately. Previous research states that empathy and perspective-taking lead to different outcomes over varying interactions (Coke, Batson & McDavis, 1978). Therefore, we expect both to have an effect on trust decisions, however based on previous research we suspect differing results.