Improving Trust in Declaration-Based Exchange: Experimental Evidence on Competition and Contract Enforcement

This paper studies how trust can be supported in exchange environments where potential responders make prior declarations about future return behavior. While prior work has separately examined communication, competition, or contract enforcement, how these mechanisms interact remains underexplored. We modify the standard trust game by introducing two potential responders who declare their intended returns before one is selected, before experimentally varying responder-side competition and contract enforcement in a 2 × 2 design. The results reveal an asymmetric relationship: competition significantly increases trust and realized trustworthiness, whereas contract enforcement alone does not generate a statistically significant increase in trust. However, when competition is combined with enforcement, the effect is substantially amplified, producing the highest levels of trust and trustworthiness. Mechanism evidence shows that competition drives higher declarations and selection incentives, while enforcement eliminates the declaration-fulfillment gap, making competitive declarations credible. These findings suggest that competition and enforcement are complements rather than substitutes—a result with implications for the design of online platforms and other markets where trust depends on prior declarations.