Harnessing the Benefits of Betrayal Aversion

Recent research suggests that while betrayal aversion may have negative effects, the presence of betrayal-averse agents is beneficial in reducing trustees’ willingness to betray trust. In light of this, many common knowledge institutions may have adopted rules and features which mitigate the emotional dis-utility associated with betrayal aversion, while simultaneously maintaining the high levels of reciprocation brought about by the presence of betrayal-averse agents. Here we conduct a laboratory experiment that identifies one such feature common to many institutions successfully governing economic and social interaction: the option to avoid knowing painful details of failed economic exchange.

Find article at Science Direct.