To Explore How Financial Compensation Affects Trust Repair

Trust repair has begun to attract scholars’attention in the past ten years, but multiple strategies, including substantial and verbal ones, have been already attempted to restore the violated trust in a relationship, like apology or penance. Among these, the offer of financial compensation has been verified to be an intuitive and adequate response. However, a controversy about repair effects of compensation sizes occurs in the investigation of financial compensation as a repair tool. Considering the absolute control of outcome concerns, some researchers support that a larger size of financial compensation will contribute to trust repair more effectively. On the other hand, on account of the preference for justice principle, it is said that exact compensation can achieve a cliff effect on trust repair for satisfying the offset of victim’s monetary losses. Besides, it is concluded that repair effects would be affected by situational factors. Because the adherence of psychological contract is the underlying mechanism of trust relationship, we deduced that the severity of trust violation may moderate directly the relations between financial compensation and trust repair. Thus, to provide a comprehensive research framework and extend the research realm, the present study further explores how financial compensation affects on trust repair thoughtfully.This study adopts a dictator game as the research paradigm, uses the amounts of unfair allocation to manipulate the severity of trust violation and utilizes the rounds of fair allocation to induce the risk levels victims perceive. Both in scenario and real-interaction situations, it investigates repair effects of compensation sizes and its underlying mechanism under the moderation of the severity of trust violation.We conducted three lab experiments to investigate the research gap. As a scenario study, a total of127undergraduate students participated in Experiment1. The experiment consisted of eight conditions of2(the severity of violation:severe or slight) x4(compensation sizes:exact compensation, mild overcompensation, medium overcompensation or excess overcompensation). Experiment2replicated the findings presented above in a real-interaction situation. There were115subjects participating in this experiment which included six conditions of2(the severity of violation:severe or slight) x3(compensation sizes:exact compensation, medium overcompensation or excess overcompensation). Furthermore, the multiple-round Experiment3had74participants, consisting of three conditions (rounds of fair allocation:zero, two or four).The results of research:(1) After providing financial compensation (100,120,140,160), both in the severe and slight trust violation, the victims’trust levels are enhanced significantly.(2) However, the same amounts of compensation restore the slightly and severely violated trust in different ways.(3) In the severe trust violation, the compensation amounts (120&140) enhance the victims’trust levels greatly, but the amounts of compensation (100&160) do not produce a significant trust repair.(4) In the slight trust violation, all amounts of compensation (100,120,140,160) enhance the violated trust in some extents, but the effects of trust repair in all amounts of compensation have no significant difference.We can conclude that:(1) The violated trust can be restored through providing financial compensation.(2) The severity of trust violation functioned as a moderator on repair effects of financial compensation.(3) In the condition of slight trust violation, compensation sizes had no difference on their repair effects.(4) In the condition of severe trust violation, repair effects of compensation sizes presented an inverted U-shaped curve. The medium overcompensation can repair the severely violated trust more effectively than the exact compensation and excess overcompensation.(5) It was the high risk victim perceived that leaded to failure of excess overcompensation on trust repair, primarily following the severe violation. However, repeatedly trustworthy interactions can restore its repair functions.In summary, the present study contributes to understanding the effects of financial compensation on trust repair thoughtfully. It does not only solve the controversy on repair effects of compensation sizes creatively, but also explore its functioning mechanism deeply. Besides, this study also provides a reference for applying the financial compensation effectively to repair trust in practice.