Need-Based Transfer Systems are More Vulnerable to Cheating When Resources are Hidden

Need-based transfer systems function to pool risk. Such arrangements are bound by two simple rules: Ask for help only when in need and, if you are able, give help to others who ask. But there is a temptation for individuals to break these rules for short-term personal profit. Here, we study one factor that may enforce honesty in need-based transfer relationships: the visibility of resources. Across three experiments employing a novel experimental economic game, breaking of both need-based transfer rules increased when resources were hidden rather than visible. Participants with hidden resources were (1) more likely to request help when not actually in need (greediness), and (2) more likely to not fulfill requests from others for help, even when they had sufficient resources available to help (stinginess). These findings highlight the visibility of resources as one potential limitation of cooperative risk pooling systems.