Abstract

An important challenge for actors in economic exchange relations concerns dealing with the aftermath of unethical behavior and the violation of trust that such transgressions entail. As transgressions in these relations often result in financial harm for one party, a common restorative approach consists of the transgressor paying a financial compensation to the victim; either voluntarily, or following coercion by a third party (cf. litigation). In the present article, we studied the impact of financial compensations on victims' trust towards the transgressor and examined whether the size of the compensation is relevant to this process. In contrast to out-come-based models in game theory, we predicted that whether larger compensations foster more trust, depends on whether the compensation is provided voluntarily or not. Experimental data from a trust game supported our hypothesis by showing that larger compensations only lead to more trust when the transgressor provided the compensation voluntarily, whereas compensation size had no effect when the transgressor was forced by a third party