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Altruism, equity and reciprocity in a gift-exchange experiment: An encompassing approach

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  • Gary Charness
  • Ernan Haruvy

Abstract

Considerable experimental evidence suggests that non-pecuniary motives must be addressed when modeling behavior in economic contexts. Recent models of non-pecuniary motives can be classified as either altruism- based, equity-based, or reciprocity-based. We estimate and compare leading approaches in these categories, using experimental data. We then offer a flexible approach that nests the above three approaches, thereby allowing for nested hypothesis testing and for determining the relative strength of each of the competing theories. In addition, the encompassing approach provides a functional form for utility in different settings without the restrictive nature of the approaches nested within it. Using this flexible form for nested tests, we find that intentional reciprocity, distributive concerns, and altruistic considerations all play a significant role in players' decisions.

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Bibliographic Info

Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 368.

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Date of creation: Mar 1999
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Handle: RePEc:upf:upfgen:368

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Web page: http://www.econ.upf.edu/

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Keywords: Altruism; experiment; equity; encompassing; fairness; inequality aversion; reciprocity; Leex;

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  1. Abbink, Klaus & Bernd Irlenbusch & Elke Renner, 1997. "The Moonlighting Game - An Experimental Study on Reciprocity and Retribution," Discussion Paper Serie B, University of Bonn, Germany 415, University of Bonn, Germany.
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  11. Kagel, John H. & Kim, Chung & Moser, Donald, 1996. "Fairness in Ultimatum Games with Asymmetric Information and Asymmetric Payoffs," Games and Economic Behavior, Elsevier, Elsevier, vol. 13(1), pages 100-110, March.
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  13. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard H, 1986. "Fairness and the Assumptions of Economics," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 59(4), pages S285-300, October.
  14. Fehr, Ernst & Kirchsteiger, George & Riedl, Arno, 1993. "Does Fairness Prevent Market Clearing? An Experimental Investigation," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 108(2), pages 437-59, May.
  15. Fehr, Ernst, et al, 1998. "When Social Norms Overpower Competition: Gift Exchange in Experimental Labor Markets," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 16(2), pages 324-51, April.
  16. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, American Economic Association, vol. 90(1), pages 166-193, March.
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