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A Theory Of Fairness, Competition, And Cooperation

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  • Ernst Fehr
  • Klaus M. Schmidt

Abstract

There is strong evidence that people exploit their bargaining power in competitive markets but not in bilateral bargaining situations. There is also strong evidence that people exploit free-riding opportunities in voluntary cooperation games. Yet, when they are given the opportunity to punish free riders, stable cooperation is maintained, although punishment is costly for those who punish. This paper asks whether there is a simple common principle that can explain this puzzling evidence. We show that if some people care about equity the puzzles can be resolved. It turns out that the economic environment determines whether the fair types or the selfish types dominate equilibrium behavior. © 2000 the President and Fellows of Harvard College and the Massachusetts Institute of Technology

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Bibliographic Info

Article provided by MIT Press in its journal The Quarterly Journal of Economics.

Volume (Year): 114 (1999)
Issue (Month): 3 (August)
Pages: 817-868

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Handle: RePEc:tpr:qjecon:v:114:y:1999:i:3:p:817-868

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  1. Une critique de l’économie comportementale
    by ? in Rationalité Limitée on 2010-01-05 07:42:27
  2. Regarding Harford
    by ? in Amanuensis on 2010-01-30 10:05:00
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