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A Theory of Reciprocity

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  • Falk, Armin
  • Fischbacher, Urs

Abstract

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 bilateral interactions outcomes tend to be ‘fair’ whereas in competitive markets even extremely unfair distributions may arise.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3014.

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Date of creation: Oct 2001
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Handle: RePEc:cpr:ceprdp:3014

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Related research

Keywords: cooperation; fairness; game theory; reciprocity;

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References

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  18. Gary Bolton & Jordi Brandts & Axel Ockenfels, 1998. "Measuring Motivations for the Reciprocal Responses Observed in a Simple Dilemma Game," Experimental Economics, Springer, vol. 1(3), pages 207-219, December.
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  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.
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  23. Brandts, J. & Sola, C., 1998. "Reference Points and Negative Reciprocity in Simple Sequential Games," UFAE and IAE Working Papers 425.98, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  24. Geanakoplos, John & Pearce, David & Stacchetti, Ennio, 1989. "Psychological games and sequential rationality," Games and Economic Behavior, Elsevier, vol. 1(1), pages 60-79, March.
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