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You Owe Me

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  • Malmendier, Ulrike
  • Schmidt, Klaus M.

Abstract

In many cultures and industries gifts are given in order to influence the recipient, often at the expense of a third party. Examples include business gifts of firms and lobbyists. In a series of experiments, we show that, even without incentive or informational effects, small gifts strongly influence the recipient’s behavior in favor of the gift giver, in particular when a third party bears the cost. Subjects are well aware that the gift is given to influence their behavior but reciprocate nevertheless. Withholding the gift triggers a strong negative response. These findings are inconsistent with the most prominent models of social preferences. We propose an extension of existing theories to capture the observed behavior by endogenizing the “reference group” to whom social preferences are applied. We also show that disclosure and size limits are not effective in reducing the effect of gifts, consistent with our model. Financial incentives ameliorate the effect of the gift but backfire when available but not provided.

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Bibliographic Info

Paper provided by University of Munich, Department of Economics in its series Discussion Papers in Economics with number 14241.

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Date of creation: Nov 2012
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Handle: RePEc:lmu:muenec:14241

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Keywords: Gift exchange; externalities; lobbyism; corruption; reciprocity; social preferences;

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References

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  1. M. Rabin, 2001. "Incorporating Fairness into Game Theory and Economics," Levine's Working Paper Archive 511, David K. Levine.
  2. Gary Charness & Matthew Rabin, 2003. "Understanding Social Preferences with Simple Tests," General Economics and Teaching 0303002, EconWPA.
  3. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
  4. Ernst Fehr & Simon G�chter, 2000. "Fairness and Retaliation: The Economics of Reciprocity," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 159-181, Summer.
  5. Matthew Rabin., 2000. "Risk Aversion and Expected-Utility Theory: A Calibration Theorem," Economics Working Papers E00-279, University of California at Berkeley.
  6. Abbink, Klaus, 2004. "Staff rotation as an anti-corruption policy: an experimental study," European Journal of Political Economy, Elsevier, vol. 20(4), pages 887-906, November.
  7. David K Levine, 1997. "Modeling Altruism and Spitefulness in Experiments," Levine's Working Paper Archive 2047, David K. Levine.
  8. Akerlof, George A, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, MIT Press, vol. 97(4), pages 543-69, November.
  9. Uri Gneezy & John List, 2006. "Putting behavioral economics to work: Testing for gift exchange in labor markets using field experiments," Natural Field Experiments 00259, The Field Experiments Website.
  10. Greiner, Ben, 2004. "An Online Recruitment System for Economic Experiments," MPRA Paper 13513, University Library of Munich, Germany.
  11. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Why corruption will always be with us
    by Economic Logician in Economic Logic on 2012-12-13 15:37:00
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Cited by:
  1. van Veldhuizen, Roel, 2013. "The influence of wages on public officials' corruptibility: A laboratory investigation," Discussion Papers, Research Unit: Market Behavior SP II 2013-210, Social Science Research Center Berlin (WZB).
  2. Currie, Janet & Lin, Wanchuan & Meng, Juanjuan, 2013. "Social networks and externalities from gift exchange: Evidence from a field experiment," Journal of Public Economics, Elsevier, vol. 107(C), pages 19-30.
  3. van Veldhuizen, R., 2013. "The influence of wages on public officials’ corruptibility: A laboratory investigation," Journal of Economic Psychology, Elsevier, vol. 39(C), pages 341-356.

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