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Reputation and Reciprocity: Consequences for Labour Relations

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Author Info
Falk, Armin
Gächter, Simon

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Abstract

Recent evidence highlights the importance of social norms in many economic relations. 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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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3018.

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Date of creation: Oct 2001
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Handle: RePEc:cpr:ceprdp:3018

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Related research
Keywords: incomplete contracts; reciprocity; repeated games; reputation;

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Find related papers by JEL classification:
J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

References listed on IDEAS
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    Other versions:
  4. Kreps, David M. & Milgrom, Paul & Roberts, John & Wilson, Robert, 1982. "Rational cooperation in the finitely repeated prisoners' dilemma," Journal of Economic Theory, Elsevier, vol. 27(2), pages 245-252, August. [Downloadable!] (restricted)
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  6. Fehr, Ernst & Kirchsteiger, George & Riedl, Arno, 1993. "Does Fairness Prevent Market Clearing? An Experimental Investigation," The Quarterly Journal of Economics, MIT Press, vol. 108(2), pages 437-59, May. [Downloadable!] (restricted)
  7. Abbink, Klaus & Irlenbusch, Bernd & Renner, Elke, 2000. "The moonlighting game: An experimental study on reciprocity and retribution," Journal of Economic Behavior & Organization, Elsevier, vol. 42(2), pages 265-277, June. [Downloadable!] (restricted)
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  20. Cooper, R. & DeJong, D.W. & Ross, T.W., 1992. "Cooperation without Reputation: Experimental Evidence from Prisoner's Dilemma Games," Papers 36, Boston University - Industry Studies Programme.
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  21. 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.
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  23. Ernst Fehr & Simon Gaechter, . "Do Incentive Contracts Crowd out Voluntary Cooperation?," IEW - Working Papers iewwp034, Institute for Empirical Research in Economics - IEW. [Downloadable!]
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  24. Rabin, Matthew, 1993. "Incorporating Fairness into Game Theory and Economics," American Economic Review, American Economic Association, vol. 83(5), pages 1281-1302, December. [Downloadable!] (restricted)
  25. Berg Joyce & Dickhaut John & McCabe Kevin, 1995. "Trust, Reciprocity, and Social History," Games and Economic Behavior, Elsevier, vol. 10(1), pages 122-142, July. [Downloadable!] (restricted)
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  1. Ernst Fehr, 2003. "Psychological Foundations of Incentives," Microeconomics 0305010, EconWPA. [Downloadable!]
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  2. Stéphane Mahuteau, 2006. "A Model of Reciprocal Fairness: Application to the Labour Contract," Research Papers 0609, Macquarie University, Department of Economics. [Downloadable!]
  3. Uri Gneezy & John A. List, 2006. "Putting Behavioral Economics to Work: Testing for Gift Exchange in Labor Markets Using Field Experiments," NBER Working Papers 12063, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
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