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What you don’t know won’t hurt you: a laboratory analysis of betrayal aversion

Published online by Cambridge University Press:  14 March 2025

Jason A. Aimone  and
Daniel Houser
Jason A. Aimone*
Affiliation:
Virginia Tech Carilion Research Institute, Virginia Polytechnic Institute and State University, 2 Riverside Circle, Roanoke, VA 24016, USA
Daniel Houser*
Affiliation:
Interdisciplinary Center for Economic Science, George Mason University, 3330 Washington Blvd., Arlington, VA 22201, USA
*
jaimone@vtc.vt.edu
dhouser@gmu.edu
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Abstract

Recent research argues “betrayal aversion” leads many people to avoid risk more when a person, rather than nature, determines the outcome of uncertainty. However, past studies indicate that factors unrelated to betrayal aversion, such as loss aversion, could contribute to differences between treatments. Using a novel experiment design to isolate betrayal aversion, one that varies how strategic uncertainty is resolved, we provide rigorous evidence supporting the detrimental impact of betrayal aversion. The impact is substantial: holding fixed the probability of betrayal, the possibility of knowing that one has been betrayed reduces investment by about one-third. We suggest emotion-regulation underlies these results and helps to explain the importance of impersonal, institution-mediated exchange in promoting economic efficiency.

Keywords

Betrayal aversionRiskTrustEmotion regulation

JEL classification

C91: Laboratory, Individual Behavior D81: Criteria for Decision-Making under Risk and Uncertainty
Type
Research Article
Information
Experimental Economics , Volume 15 , Issue 4 , December 2012 , pp. 571 - 588
Copyright
Copyright © 2012 Economic Science Association

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Footnotes

Electronic Supplementary Material The online version of this article (doi:https://doi.org/10.1007/s10683-012-9314-z) contains supplementary material, which is available to authorized users.

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