شفافیت، بهره وری و توزیع رفاه اقتصادی با عبور از طریق بازی های اعتماد سرمایه گذاری

We design an experiment to examine behavior and welfare in a multi-level trust game representing a pass through investment in an intermediated market. In a repeated game, an investor invests via an intermediary who lends to a borrower. A pre-experiment one-shot version of the game serves as a baseline and to type each subject. We alter the transparency of exchanges between non-adjacent parties. We find transparency of the exchanges between the investor and intermediary does not significantly affect welfare. However, transparency regarding exchanges between the intermediary and borrower promotes trust on the part of the investor, increasing welfare. Further, this has asymmetric effects: borrowers and intermediaries achieve greater welfare benefits than investors. We discuss implications for what specific aspects of financial market transparency may facilitate more efficiency.

Berg et al. (1995) investigate trust and reciprocity in a two-player investment trust game. Since then, the game has been studied extensively. Ostrom and Walker (2005), among others, review the literature and identify that social distance, communication and reputation all affect the degree of trust and reciprocity. The primary focus is on one-to-one trust and reciprocity behavior. In reality, many situations require multiple levels of trust. For example, when a person invests in a bond fund, he or she trusts the fund manager not to misrepresent the bonds in the fund. The fund manager, in turn, must trust the bond issuers. Alternatively, consider collateralized debt obligations (CDOs). In the home mortgage market, institutional arrangements emerged in which mortgages were originated by one firm (e.g., Country Wide), sold to an investment banker that assembled them into large packages, and issued Mortgage Backed Securities (a kind of CDO) that were in turn sold to investors. Investors trusted the originators to perform due diligence in evaluating the risk of borrowers, and security issuers to provide adequate data trails and loan servicing arrangements. This chain required multiple levels of trust to justify investment. As the recent financial crisis shows, failures at one level can spread through a multi-level system. Further, the challenges recovering show that the breakdown of serial trust relations can have drastic implications. Financial market crises frequently prompt calls for reform that include greater transparency. For example, in a letter to the G20 on June 16, 2010, President Obama states: “We should support efforts to enhance transparency and increase disclosure by our large financial institutions.” He further asks for: “More transparency and disclosure to promote market integrity and reduce market manipulation.” (Obama, 2010). Transparency is often one of the goals of regulation ranging from current calls for reform to the Sarbanes-Oxley Act and the Securities and Exchange Act. One of the stated goals of the Securities and Exchange Commission is: “a far more active, efficient, and transparent capital market that facilitates the capital formation so important to our nation's economy.”1 Notice that all of these are aimed at the capital markets, not at retail lending markets. The implicit assumption is that capital market transparency will improve outcomes. However, it is difficult to draw clear conclusions about the effects of transparency alone or at what level transparency matters in naturally occurring environments. A number of laboratory studies have documented that transparency may actually harm market efficiency, reduce economic welfare and produce non-equilibrium behavior. For example, Smith (1991) documents that in continuous double auctions under private information convergence to equilibrium is faster than under complete information. Similarly, Noussair and Porter (1992) report that English and uniform price sealed bid auctions are more efficient when there is a lack of common information. Cason and Plott (2005) find that forced information disclosure about privately negotiated contracts can significantly reduce economic welfare. Transparency can also distort negotiating processes in bargaining games (Roth, 1987) and have unintended consequences on individual behavior in contests and tournaments (Sheremeta, 2010 and Mago et al., 2012). Given the findings of previous literature, it is not clear how transparency is expected to impact financial markets that require multiple levels of trust. On the one hand, transparency may encourage trust between the parties. However, transparency may also discourage investments if investors know that their decisions are being monitored. The problem is even more complicated because, usually, regulation promoting transparency is tied to other reforms and occurs during a time of other changes to the economy (e.g., the Securities and Exchange Act). Therefore, we design an experiment, using a multi-level trust game, to study transparency in a controlled investment/trust environment. Furthermore, our experiment allows us to isolate transparency in what are effectively two levels: the capital market (between the investor and intermediary) versus the retail lending market (between the intermediary and the borrower). Although we do not have clear ex-ante predictions on how transparency will impact trust and reciprocity in the multi-level trust game, we expect for the effect may well be heterogeneous, i.e., transparency impacts investors, intermediaries and borrowers in different ways. The conventional two-player trust game is commonly interpreted as a (single level) investment game. An investor (the first player) invests money with a trustee (the second player) who employs it productively and chooses how much, if any, to return to the investor. Because each player is involved in each transaction and, hence, observes the play of all players, the game is completely transparent. Our game extends this to include a financial intermediary, creating a three-player trust game by adding a third player (the intermediary). This allows us to control transparency at different levels by changing whether each player can observe the play of all others or only observe transactions involving the player with whom he interacts bilaterally. In our game, the three players move sequentially. The first player (the investor) initiates the process by sending money (any portion of his endowment) to the second player (the intermediary) with the amount being tripled. One can interpret the tripled amount as the case where the intermediary creates value through the intermediation process (e.g., through pooling investments, diversification and increased liquidity). The intermediary then decides how much of the tripled amount to loan to the third player (the borrower), with the amount being tripled again. This can be interpreted as putting the money to productive resource use. The borrower chooses how much to return to the intermediary who, in turn, chooses how much to return to the investor. This effectively creates an intermediated market, generating gains from specialization and trade from two interactions based on trust and reciprocity. Our game is repeated, but we use an independent one-shot pre-experiment version to type the behavior of each subject in his or her role and for comparison with the repeated version. In the one-shot setting, we find that transparency has no significant effect. However, in the repeated setting, transparency of exchanges between the intermediary and borrower (the retail market) to the investor increase efficiency and payoffs to all parties. Transparency of exchanges between the investor and intermediary (the capital market) to the borrower has no significant effect upon efficiency (if anything, the effect is negative). Therefore, it appears that transparency regarding the borrower and intermediary transactions matters most. Transparency regarding the investor and intermediary transactions does not matter as much. Further, we find that it is the transparency, and not the specific exchanges, that increase welfare. Last, we find that benefits are asymmetric. While all parties benefit from the ability of investors to view the borrower/intermediary transactions, the borrowers and intermediaries benefit relatively more. Thus, it is the retail borrower who gains when his or her moves are transparent. Some elements of our three-player trust game can be found in the existing literature. First, our three-player trust game is related to the three-player centipede game with a binary choice space (Rapoport et al., 2003 and Murphy et al., 2004) and continuous choice space (Sheremeta and Zhang, 2009). Second, multi-level trust has been studied in the evolutionary literature. For example, Greiner and Levati (2005) use a variant of a trust game in order to implement a cyclical network of indirect reciprocity where the first individual may help the second, the second help the third, and so on until the last, who in turn may help the first. As in a two-player trust game, the authors find that pure indirect reciprocity enables mutual trust in the multi-player environment.2 Finally, the three-player trust game is related to a three-person ultimatum game by Buchner et al. (2004). While related to it, none of this research studies a direct, multi-level trust game corresponding to pass-through securities; nor is transparency varied in such games.

We design an experiment to examine welfare and behavior in a multi-level investment trust game. In the scenario, an investor invests via an intermediary who lends to a borrower in a repeated game. We alter the transparency of exchanges between non-adjacent parties. We find that transparency does not change aggregate behavior or efficiency in a one-shot multi-level trust game. However, in repeated multi-level trust games, transparency matters. Providing transparency to the investor (i.e., allowing the investor to see the exchange between the intermediary and the borrower) increases efficiency and payoffs to all players, while providing transparency to the borrower (i.e., allowing the borrower to see the exchange between the investor and intermediary) does not change efficiency and payoffs significantly. Providing transparency to the investor also shifts the distribution of payoffs towards intermediaries and borrowers, while providing transparency to the borrower does not change the distribution of payoffs significantly. We introduce and test the ability of a one-shot game to measure the trust characteristics of subjects and to predict trusting behavior in a subsequent repeated version of the same stage game. This procedure may have value in other applications not yet explored. Overall, our findings indicate that, in the multi-level trust game, transparency can matter, improving outcomes in financial markets and economic welfare. On the other hand, only one side of transparency matters. For financial markets this implies that not all forms of transparency are equal in their ability to improve market outcomes. In the analog pass through securities market (the collateralized, home mortgage debt obligation market we discussed in the introduction), the ability to verify the credit worthiness of borrowers would seem to be the most important aspect of transparency. We also document that transparency affects welfare asymmetrically. When transparency matters, it is borrowers and intermediaries who benefit more than investors in relative terms. In our game, this arises because investors invest more, making everyone better off. At the same time, borrowers and intermediaries choose to keep a relatively larger share of the welfare gains. If the policy goal of the government is to make home ownership (and borrowing in general) more accessible, then transparency about borrower's decisions can facilitate this while shifting economic welfare toward the ultimate borrowers. Of course, in a naturally occurring market, there would be a tradeoff between transparency at the retail level and privacy. Further, here, the distribution of surplus depends on the unrestricted choices of the borrowers and intermediaries about how much to return. The distribution of welfare gains in naturally occurring markets may depend on the relative bargaining powers of the agents involved in the transactions. There are several obvious extensions to our research. First, the trust relationship may involve even higher orders and our game would be easy to generalize to three or more levels. We suspect that in situations beyond two layers of trust transparency would matter most to those who are at an informational disadvantage (i.e., investors).14 Second, trust may be circular instead of linear as we have in our game. It would be simple to design a game where either the borrower gave back money both to the investor and intermediary or, alternatively to the investor with the investor paying the intermediary (as in Sheremeta and Zhang, 2009). Second, transparency here is in terms of actions. Transparency with respect to entire strategies may have different effects. Finally, calls for reform often include reporting standards and oversight bodies. One could easily add a monitoring agent to replace direct transparency in our setup. One could also report prior aggregate outcomes (as in the original Berg et al., 1995 paper) or current aggregate information. Of course, all may interact with transparency and help us inform policy with respect to transparency, reporting and oversight in financial markets.