Are Humans innately trustworthy?

Consider a game — You receive $100. You can either choose to keep it or offer it to a stranger. If you offer it to the stranger, the money will instantly quadruple and the stranger will receive $400.

At this point, the stranger can decide to keep all the money or return half of it back to you.

If you ask standard economists, what the stranger is likely to do here— they’ll tell you that the stranger will maximize his own utility and keep the entire $400. They'll tell you there's no need to reciprocate since returning half the money makes no economic sense.

Yet when you conduct this type of experiment with real people, the results are often counterintuitive.

Most people that get the $100 immediately send the money to the stranger & the people that play the role of the strangers often return half the money to the original recipient

Meaning humans reciprocate. When someone does something nice for us, we feel compelled to return the favour, often in a similar way, and it comes very naturally.

And there's a remarkable insurance company in the US trying to build a business centred on this rather simple premise. So if you haven't read our story on Lemonade yet, we urge you to do so right now https://finshots.in/archive/lemonade-insurance-company/