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Reputation or Reciprocity? An Experimental Investigation

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  • Simon Gaechter
  • Armin Falk

Abstract

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.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 496.

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Date of creation: 2001
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Handle: RePEc:ces:ceswps:_496

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Keywords: Reciprocity; reputation; repeated games; incomplete contracts;

References

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  1. Ernst Fehr & Simon Gaechter, . "Do Incentive Contracts Crowd out Voluntary Cooperation?," IEW - Working Papers 034, Institute for Empirical Research in Economics - University of Zurich.
  2. Armin Falk & Urs Fischbacher, . "A Theory of Reciprocity," IEW - Working Papers 006, Institute for Empirical Research in Economics - University of Zurich.
  3. Reinhard Selten & Michael Mitzkewitz & Gerald R. Uhlich, 1997. "Duopoly Strategies Programmed by Experienced Players," Econometrica, Econometric Society, vol. 65(3), pages 517-556, May.
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  8. Ernst Fehr & Armin Falk, 2003. "Wage Rigidity in a Competitive Incomplete Contract Market," Labor and Demography 0305001, EconWPA.
  9. Georg Kirchsteiger & Martin Dufwenberg, 2000. "Reciprocity and wage undercutting," ULB Institutional Repository 2013/5905, ULB -- Universite Libre de Bruxelles.
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  13. David Kreps & Paul Milgrom & John Roberts & Bob Wilson, 2010. "Rational Cooperation in the Finitely Repeated Prisoners' Dilemma," Levine's Working Paper Archive 239, David K. Levine.
  14. Selten, Reinhard & Stoecker, Rolf, 1986. "End behavior in sequences of finite Prisoner's Dilemma supergames A learning theory approach," Journal of Economic Behavior & Organization, Elsevier, vol. 7(1), pages 47-70, March.
  15. Keser, Claudia, 1997. "SUPER: Strategies used in public goods experimentation rounds," Sonderforschungsbereich 504 Publications 97-24, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
  16. Clark, Kenneth & Sefton, Martin, 2001. "The Sequential Prisoner's Dilemma: Evidence on Reciprocation," Economic Journal, Royal Economic Society, vol. 111(468), pages 51-68, January.
  17. Friedel Bolle, 1998. "Rewarding Trust: An Experimental Study," Theory and Decision, Springer, vol. 45(1), pages 83-98, August.
  18. Agell, Jonas & Lundborg, Per, 1993. "Theories of Pay and Unemployment: Survey Evidence from Swedish Manufacturing Firms," Working Paper Series 380, Research Institute of Industrial Economics.
  19. Jacobsen, Eva & Abdolkarim Sadrieh, 1996. "Experimental Proof for the Motivational Importance of Reciprocity," Discussion Paper Serie B 386, University of Bonn, Germany.
  20. Berg Joyce & Dickhaut John & McCabe Kevin, 1995. "Trust, Reciprocity, and Social History," Games and Economic Behavior, Elsevier, vol. 10(1), pages 122-142, July.
  21. James Andreoni & John H Miller, 1997. "Rational Cooperation in the finitely repeated prisoner's dilemma: experimental evidence," Levine's Working Paper Archive 670, David K. Levine.
  22. Keser, Claudia & van Winden, Frans, 2000. " Conditional Cooperation and Voluntary Contributions to Public Goods," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(1), pages 23-39, March.
  23. Martimort, David, 1997. " A Theory of Bureaucratization Based on Reciprocity and Collusive Behavior," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(4), pages 555-79, December.
  24. Samuel Bowles, 1998. "Endogenous Preferences: The Cultural Consequences of Markets and Other Economic Institutions," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 75-111, March.
  25. Benoit, Jean-Pierre & Krishna, Vijay, 1985. "Finitely Repeated Games," Econometrica, Econometric Society, vol. 53(4), pages 905-22, July.
  26. Akerlof, George A, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, MIT Press, vol. 97(4), pages 543-69, November.
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Cited by:
  1. Francesco Rullani, 2005. "The Debate and the Community. “Reflexive Identity” in the FLOSS Community," LEM Papers Series 2005/18, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.

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