Commitment to the truth creates trust in market exchange: Experimental evidence

Social norms like the mutual belief in reciprocity facilitate economic exchange. But this reciprocity norm requires trust among traders, which can be challenging to create among strangers even with communication. The honesty oath is a time-honored mechanism that societies use to overcome this challenge-taking a solemn oath to tell the truth sends a trustworthy signal of real economic commitment given incomplete contracts. Herein we explore how the truth-telling oath creates trust within the sequential reciprocity trust game with pre-play, fixed-form, and cheap-talk communication. Four key results emerge: (1) communication under oath creates more trust and cooperative behavior; but (2) the oath induces a selection effect-it makes people more wary of using communication as a signal. (3) Although the overall net effect on cooperation is positive, the oath cannot reverse a general decay of cooperation over time. (4) By comparing the oath's performance to mild and deterrent fines for deception, we find that the oath is behaviorally equivalent to mild fines. The deterrent fine induces the highest level of cooperation