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The hidden cost of insurance on cooperation

Published on Dec 1, 2017in Journal of Behavioral Decision Making
· DOI :10.1002/bdm.2033
Ppfm Philippe van de Calseyde2
Estimated H-index: 2
(TU/e: Eindhoven University of Technology),
Gideon Keren24
Estimated H-index: 24
(Tilburg University),
Marcel Zeelenberg55
Estimated H-index: 55
(Tilburg University)
Abstract
A common solution to mitigate risk is to buy insurance. Employing the trust game, we find that buying insurance against the risk of betrayal has a hidden cost: trustees are more likely to act opportunistically when trustors choose to be insured against the breach of trust. Supposedly, trustees are less likely to cooperate when trustors buy insurance because choosing insurance implicitly signals that the trustor expects the trustee to behave opportunistically, paradoxically encouraging trustees not to cooperate. These results shed new light on the potential drawbacks of financial safeguards that are intended to minimize the risky nature of trust taking: the presumed safeguard against the risk of betrayal may, under certain circumstances, increase the probability of betrayal.
  • References (31)
  • Citations (3)
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References31
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