TRUST It is happier sometimes to be cheated than not to trust.

TRUST

It is happier to be sometimes cheated than not to trust
Samuel Johnson in The Rambler (1750)
I went to a very interesting lecture recently by Prof. Madan Pillutla of the London Business School; he invited the class to consider the situation as set out below.
A game with two players
Initiator starts off with a sum of money, say £100. They can send some or all of it to the responder.
Any money that is sent will be tripled on its way to them. E.g., if the initiator sends them £1, the responder will receive £3 the initiator sends them £10, the responder will receive £30; the initiator can send the responder any amount they wish.
If the responder receives any money from the initiator, they will have a choice to send some, none, or all of it back to the initiator. (The responder will have 3 times what the initiator sent them.) They can send back any amount that they wish to the initiator. (Note: whatever they send back will not be tripled again)

As the initiator how much money would you send knowing that the amount would be tripled in transmission but the responder can send back any amount they wish? As expected there was a variety of answers, ranging from zero the risk specialists (much chastened by recent experience) to the full £100 (about 20%of the audience of 40 or so).
Take a moment to consider what you would do?
The table below shows results from experiments with $10 and $20. The conclusion is clear the more you send then on average the better off you are (For these relatively trivial amounts of money).
If you fully trust the other party then that trust begets reciprocity.
Trusting actions that were quick (and therefore seen as spontaneous) were more likely to be reciprocated than those that are not (Narayanan & Pillutla, 2009)
Trust was highest when cooperation was not the result of a contract (Malhotra & Murnighan, 2002)

Some conclusions from the Professor
Be a Trusting Person (Develop a Thick Skin; Take a Leap of Faith)
Trust Many People Completely: This way you hedge your bets over many trusting choices, far better than hedging your bets by partially trusting everyone.
Create Situations that allow/promote Trust (Spontaneous, without a safety net, without expectations, etc.,)
Follow through on your promise-- Good reputations are priceless, and they are very fragile
A unilateral gesture may ensure cooperation when you get off the wrong foot (e.g., Anwar Sadat)
If you think that something may go wrong, due to the action of the other party, it is incumbent upon you to do something about it
Be sure that everyone has defined the game in the same way