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

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Author Info
Fehr, Ernst
Schmidt, Klaus M.

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Abstract

Most economic models are based on the self-interest hypothesis that assumes that material self-interest exclusively motivates all people. Experimental economists have gathered overwhelming evidence in recent years, however, that systematically refutes the self-interest hypothesis, suggesting that concerns for altruism, fairness, and reciprocity strongly motivate many people. Moreover, several theoretical papers demonstrate that the observed phenomena can be explained in a rigorous and tractable manner. These theories then induced a first wave of experimental research which offered exciting insights into both the nature of preferences and the relative performance of competing fairness theories. The purpose of this chapter is to review these developments, to point out open questions, and to suggest avenues for future research. We also discuss recent neuroeconomic evidence that is consistent with the view that many people have a taste for mutual cooperation and the punishment of norm violators. We further illustrate the powerful impact of fairness concerns on cooperation, competition, incentives, and contract design.

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This chapter was published in: S. Kolm & Jean Mercier Ythier (ed.) , Elsevier, chapter 08, pages 615-691, 2006.

This item is provided by Elsevier in its series Handbook on the Economics of Giving, Reciprocity and Altruism with number 1-08.

Handle: RePEc:eee:givchp:1-08

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This chapter was published in the following book, which is listed on IDEAS:
S. Kolm & Jean Mercier Ythier (ed.), 2006. "Handbook on the Economics of Giving, Reciprocity and Altruism," Handbook on the Economics of Giving, Reciprocity and Altruism, Elsevier, edition 1, volume 1, number 1, September. [Downloadable!] (restricted)
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Find related papers by JEL classification:
Z13 - Other Special Topics - - Cultural Economics - - - Social Norms and Social Capital; Social Networks Economic Anthropology

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  1. Reuben, E. & Suetens, S., 2009. "Revisiting Strategic versus Non-strategic Cooperation," Discussion Paper 2009-22, Tilburg University, Center for Economic Research. [Downloadable!]
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  2. Robertas Zubrickas, 2009. "How Exposure to Markets Can Favor Inequity Averse Preferences," Levine's Working Paper Archive 814577000000000193, David K. Levine. [Downloadable!]
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  11. López-Pérez, Raúl, 2008. "The Power of Words: Why Communication fosters Cooperation and Efficiency," Working Papers in Economic Theory 2009/01, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History). [Downloadable!]
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  18. Reuben, Ernesto & Riedl, Arno, 2009. "Enforcement of Contribution Norms in Public Good Games with Heterogeneous Populations," IZA Discussion Papers 4303, Institute for the Study of Labor (IZA). [Downloadable!]
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