The puppet places several coins in its “bank” rather than sharing half of them with the girl, much to her dismay. Image credit: Sean Moore, Michigan News

ANN ARBOR—Adults often engage in mutually beneficial interactions—such as business transactions—that require trust that others will reciprocate.

But this social behavior can develop as early as preschool, according to a new University of Michigan study that indicates children can engage in complex economic exchanges involving judgment about trust.

Researchers conducted experiments with 4-year-olds and 6-year-olds to determine if their actions would benefit all parties involved.

Whereas exchanges can result in larger returns for all parties, engaging in such exchanges also involve a ‘moral hazard’ when there is no guarantee or external enforcement that social partners will return an initial investment. One experimental method that captures these critical components of economic exchange is the ‘trust game.’

Felix Warneken, associate professor of psychology, poses with puppets used in the “trust experiment.” Image credit: Sean Moore, Michigan News

“We developed a child-friendly version of the trust game with real incentives to probe the developmental roots of economic trust,” said the study’s lead author Alexandra Rosati, an assistant professor of psychology and anthropology.

One experiment involves a puppeteer who uses puppets to play a coin game. The child, sitting opposite of the puppets at a table, could decide to either keep a coin or place it into an apparatus that would produce four coins for the puppet partner. Investment in the partner, therefore, increased the total amount of coins, but the child might end up with nothing unless the partner reciprocates.

The results demonstrate that the children recognize opportunities to invest in others, said co-author Felix Warneken, associate professor of psychology. Both age groups shared more resources with a partner in the trust game where reciprocation is possible, than in a sharing task measuring pure generosity.

“This shows that young children can rapidly recognize opportunities to invest in others for mutual benefit,” Warneken said.

Researchers also showed that the ability to detect cheaters emerges over a longer developmental period. Younger children were less successful than older children at investing only in a trustworthy partner who shared profits fairly over an untrustworthy puppet who kept all to the self.

A girl places coins in her “bank” during the “trust” experiment involving a puppet. Image credit: Sean Moore, Michigan News

Rosati noted that the two groups of children were highly accurate at identifying the untrustworthy partner, even though younger children did not adapt their behavior to account for this.

Overall, the study shows that this key economic behavior has roots early in development, she said.

“Young children are able to engage in complex economic exchanges involving judgments about interpersonal trust, despite not yet having mature capacities for future-oriented thinking,” Warneken said.

Older children, however, are more successful at dealing with the moral hazard of economic exchange, showing increasing sensitivity to appropriate investment partners, he said.

The study appears in the Proceedings of the Royal Society: B. Other co-authors include Natalie Benjamin of Marquette University and Kerrie Pieloch of Suffolk University.

More information:

• Study abstract: Economic trust in young children
• Alexandra Rosati
• Felix Warneken