t While economists recognize the important role of formal institutions in
the promotion of trade, there is increasing agreement that institutions are typically
endogenous to culture, making it difficult to disentangle their separate contributions.
Lab experiments that assign institutions exogenously and measure and control
individual cultural characteristics can allow for clean identification of the effects of
institutions, conditional on culture, and help us understand the relationship between
behavior and culture, under a given institutional framework. We focus on cultural
tendencies toward individualism/collectivism, which social psychologists highlight
as an important determinant of many behavioral differences across groups and
people. We design an experiment to explore the relationship between subjects’
degree of individualism/collectivism and their willingness to abandon a repeated,
bilateral exchange relationship in order to seek potentially more lucrative trade with
a stranger, under enforcement institutions of varying strength. Overall, we find that
individualists tend to seek out trade more often than collectivists. A diagnostic
treatment and additional analysis suggests that this difference may reflect both

• Individualism, collectivism, and trade