Trust but Verify: Monitoring in Interdependent Relationships

Abstract

For organizations to be effective, their employees need to rely upon each other even when they do not trust each other. One tool managers can use to promote trust-like behavior is monitoring. In this chapter, we report results from a laboratory study that describes the relationship between monitoring and trust behavior. We randomly and anonymously paired participants (n=210) with the same partner, and had them make 15 rounds of trust game decisions. We find predictable main effects (e.g. frequent monitoring increases trust behavior) as well as interesting strategic behavior. Specifically, we find that anticipated monitoring schemes (i.e. when participants know before they make a decision that they either will or will not be monitored) significantly increase trust behavior in monitored rounds, but decrease trust behavior overall. Participants in our study also reacted to information they learned about their counterpart differently as a function of whether or not monitoring was anticipated. Participants were less trusting when they observed trustworthy behavior in an anticipated monitoring period, than when they observed trustworthy behavior in an unanticipated monitoring period. In many cases, participants in our study systematically anticipated their counterpart's untrustworthy behavior. We discuss implication of these results for models of trust and offer managerial prescriptions.

Citation

Schweitzer, M.E. and Ho, T.H. (2005), "Trust but Verify: Monitoring in Interdependent Relationships", Morgan, J. (Ed.) Experimental and Behavorial Economics (Advances in Applied Microeconomics, Vol. 13), Emerald Group Publishing Limited, Leeds, pp. 87-106. https://doi.org/10.1016/S0278-0984(05)13004-1