Reputation or Reciprocity? An Experimental Investigation

Recent evidence highlights the importance of social norms in many economic relations. However, many of these relationships are long-term and provide repeated game incentives for performance. We experimentally investigate interaction effects of reciprocity and repeated game incentives in two treatments (one-shot and repeated) of a gift-exchange game. In both treatments we observe reciprocity, which is strengthened in the repeated game. A detailed analysis shows that in the repeated game some subjects imitate reciprocity. Thus, reciprocity and repeated game incentives reinforce each other. Observed behaviour is robust against experience. We conclude that a long-term interaction is a reciprocity-compatible contract enforcement device.Reciprocity, reputation, repeated games, incomplete contracts

A Theory of Reciprocity

This paper presents a formal theory of reciprocity. Reciprocity means that people reward kind actions and punish unkind ones. The theory takes into account that people evaluate the kindness of an action not only by its consequences but also by the intention underlying this action. The theory explains the relevant stylized facts of a wide range of experimental games. Among them are the ultimatum game, the gift-exchange game, a reduced best-shot game, the dictator game, the prisoner’s dilemma, and public goods games. Furthermore, the theory explains why the same consequences trigger different reciprocal responses in different environments Finally the theory explains why in bilaterial interactions outcomes tend to be ‘fair’ whereas in competitive markets even extremely unfair distributions may arise.Reciprocity, fairness, cooperation, competition, game theory

Positive and negative reciprocity in labor market

This paper reports results of an experiment designed to analyze whether reciprocal behavior survives in a more hostile environment than usually considered in the literature. In fact, positive reciprocity survives in a treatment favoring selfish behavior, although there is a decrease in the deviations from the subgame perfect Nash equilibrium. Besides positive reciprocity there is negative reciprocity in this new treatment. Additionally, this paper highlights the influence of the experimental design, namely the importance of wage cut points, on subjects' behavior.Reciprocity; Gift exchange games; Gift and offense exchange games; Incomplete contracts;Labor relations.

The importance of foregone options

Recent experimental evidence supports the influence of a player's unchosen alternatives in other agent's actions. This paper examines a tractable theoretical model of reference-dependent preferences in which individuals compare other players'chosen action with respect to their un- chosen alternatives. We analyze the equilibrium prediction in complete information sequential- move games, and compare it with that of standard games where players are not concerned about unchosen alternatives. We show that, without relying on interpersonal payo¤ comparisons (i.e., with strictly individualistic agents), our model predicts higher cooperation among the players than standard game-theoretic models. We apply our results in three economic contexts: the labor market gift exchange game, the ultimatum bargaining game, and the sequential public good game. Revised Feb. 2009Unchosen alternatives, Sequential-move games, Relative comparisons, Kindness, Reciprocity.

Theories of Fairness and Reciprocity

Most economic models are based on the self-interest hypothesis that assumes that all people are exclusively motivated by their material self-interest. In recent years experimental economists have gathered overwhelming evidence that systematically refutes the self-interest hypothesis and suggests that many people are strongly motivated by concerns for fairness and reciprocity. Moreover, several theoretical papers have been written showing that the observed phenomena can be explained in a rigorous and tractable manner. These theories in turn induced a new wave of experimental research offering additional exciting insights into the nature of preferences and into the relative performance of competing theories of fairness. The purpose of this paper is to review these recent developments, to point out open questions, and to suggest avenues for future research

Why Only Some Industries Unionize: Insights from Reciprocity Theory

This paper argues that the degree to which a given industry’s labor contracts are complete or incomplete is the major factor determining whether its workforce will be unionized. For instance, assembly line industries feature complete labor contracts because of the nature of the production technology: Either a worker keeps up with the line, or he does not. In such a situation, there is no chance for a reciprocal gift exchange under which firms offer high wages in exchange for high effort levels. The result is low wages that make workers prone to unionization. By contrast, jobs that feature incomplete contracts (lawyers, computer programmers, economists) already have reciprocity and gift exchange in place. Such benefits guarantee to workers that their better interests will be looked after by a management that wishes to maintain a positive and productive labor-management interaction.

Individual vs. collective contracts: An experimental investigation using the gift exchange game

This paper compares individual with collective contracts using modified repeated gift exchange games. The game had two variations, both following a partner design. In the individual variation different workers in the same firm can receive separate wages, and in the collective variation all workers in the same firm receive the same wage. These two variations are played altering the order. Thus the experiment has four treatments, two within subjects (regarding the games played) and two between subjects (regarding the order in which the games are played). We did not find significant differences between the two variations of the game when subjects had no experience. However, individual agreements turned out to be more efficient when subjects have previously experienced collective agreements. This result suggests subjects learned to reciprocate when they played the collective variation followed by the individual variation of the gift exchange game.laboratory experiments, gift exchange, collective contracts.

A cross-cultural study of reciprocity, trust and altruism in a gift exchange experiment

experimental design;altruism;social security;gift giving

The Economics of Fairness, Reciprocity and Altruism – Experimental Evidence and New Theories

This paper surveys recent experimental and field evidence on the impact of concerns for fairness, reciprocity and altruism on economic decision making. It also reviews some new theoretical attempts to model the observed behavior.Behavioural Economics; Other-regarding Preferences; Fairness; Reciprocity; Altruism; Experiments; Incentives; Contracts; Competition