The investment game with asymmetric information

We analyze the effects of introducing asymmetric information andexpectations in the investment game (Berg et al., 1995). In our experiment,only the trustee knows the size of the surplus. Subjects’expectations about each other’s behavior are also elicited. Our resultsshow that average payback levels increase with the average amountsent. Asymmetric information does not reduce the amounts sent andreturned, as compared with previous experimental studies. The firstmovers’ choices increase with their expectations about the second movers’payback, whose choices depend in turn on the difference between expectedand actual amounts received.