Natural Disasters and Social Preferences: The Effect of Tsunami-Memories on Cheating in Sri Lanka

Through a field experiment in Sri Lanka I analyze the role of experimentally-induced memories of 2004 tsunami on behavior in a trust game in which personal notions of cheating are elicited. Micro-finance borrowers were randomly assigned to a treatment (control) group consisting in watching a video about the calamity before (after) playing. Trust game participants were asked how much to receive (return) in order not to (make the counterpart) feel cheated; in a survey they selected whether the video mostly reminded about solidarity, looting or the calamity experience. Results suggest a differential impact of emotional stimuli induced by the video-treatment on trustors' definition of cheating and trustees' intentional cheating. Among the treated, the probability trustors define cheating as a non-negative return on investment (i.e. receive no more than what invested) and trustees satisfy trustor's cheating notion (i.e. return at least what makes him/her not feel cheated) is higher when recalling solidarity than when looting and/or the calamity. As expected, there are no significant emotional effects of the video on control group's behavior. If the trust game replicates real investment decisions, identifying the channels through which emotional memories of a past shock affect behavior offer important insights on what hinders socio-economic transactions within post-disaster areas.