Sorting with shame in the laboratory

Abstract

Trust is indispensable to fiduciary fields (e.g., credit rating), where experts exercise wide discretion on behalf of others. Can the shame from a scandal sort trustworthy people out of a fiduciary field? I tested for the possibility that a shame externality can sort in a charitable contribution game where subjects could be "ungenerous" when unobserved. After establishing that "generosity" required a contribution of more than $6, subjects were given the choice of contributing either $5 publicly or $0--$10 privately. 20/22 control subjects chose to contribute privately less than $2. 10/26 treatment subjects, after being told the prediction that they were unlikely to contribute more than $2, if they contributed privately, contributed $5 publicly. (This group also showed higher shame sensitivity.) This suggests that the mere belief that a subject would exploit the greater discretion and unobservability of a fiduciary-like position can deter entry into such a position. Thus, scandals that create such a belief could repel shame-sensitive people from that field - possibly to the detriment of the field and the economy as a whole.