Transparency and Real Effort: Evidence from a Trust Game

This paper investigates the transparency effect on participants’ effort in a one shot investment game with earned endowment. In this experimental setting the first player, or the investor, has an opportunity to earn the initial endowment by solving tasks in a simple time-limited test. In the transparent treatment the investor is informed that the second player will learn his test score, or initial endowment, and in the control treatment this information is concealed. The key finding of the study is that the mean test score and number of attempts (number of solved tasks regardless of its correctness) of the recruited students is significantly lower in the transparent treatment compared to the control group at 5% significance level, which signals that the effort level in the transparent treatment is lower. These results suggest that transparency is an important dimension in terms of effort motivation. It opens a filed for further research and discussion over the reasons for the negative transparency effect on effort.