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Fairness and Retaliation: The Economics of Reciprocitys

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Author Info
Ernst Fehr
Simon Gaechter

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Abstract

This paper shows that reciprocity has powerful implications for many economic domains. It is an important determinant in the enforcement of contracts and social norms and enhances the possibilities of collective action greatly. Reciprocity may render the provision of explicit incentive inefficient because the incentives may crowd out voluntary co-operation. It strongly limits the effects of competition in markets with incomplete contracts and gives rise to noncompetitive wage differences. Finally, reciprocity it is also a strong force contributing to the existence of incomplete contracts.

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Paper provided by Institute for Empirical Research in Economics - IEW in its series IEW - Working Papers with number iewwp040.

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Handle: RePEc:zur:iewwpx:040

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Related research
Keywords: Reciprocity Fairness Social Norms Contract Enforcement Collective Action Work Motivation Labor Markets

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Find related papers by JEL classification:
C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
D64 - Microeconomics - - Welfare Economics - - - Altruism
J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
H40 - Public Economics - - Publicly Provided Goods - - - General
K10 - Law and Economics - - Basic Areas of Law - - - General (Constitutional Law)

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Samuel Bowles & Herbert Gintis, 2000. "The Evolution of Strong Reciprocity," Working Papers 2000-05, University of Massachusetts Amherst, Department of Economics. [Downloadable!]
    Other versions:
  2. Bruno S. Frey & Marcel Kucher & Alois Stutzer, . "Outcome, Process & Power in Direct Democracy," IEW - Working Papers iewwp025, Institute for Empirical Research in Economics - IEW. [Downloadable!]
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  3. Roth, Alvin E. & Vesna Prasnikar & Masahiro Okuno-Fujiwara & Shmuel Zamir, 1991. "Bargaining and Market Behavior in Jerusalem, Ljubljana, Pittsburgh, and Tokyo: An Experimental Study," American Economic Review, American Economic Association, vol. 81(5), pages 1068-95, December. [Downloadable!] (restricted)
  4. Sethi, Rajiv & Somanathan, E., 2001. "Preference Evolution and Reciprocity," Journal of Economic Theory, Elsevier, vol. 97(2), pages 273-297, April. [Downloadable!] (restricted)
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  5. Ernst Fehr & Simon Gachter & Georg Kirchsteiger, 2001. "Reciprocity as a Contract Enforcement Device," Levine's Working Paper Archive 563824000000000143, UCLA Department of Economics. [Downloadable!]
  6. Akerlof, George A, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, MIT Press, vol. 97(4), pages 543-69, November. [Downloadable!] (restricted)
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  8. Lisa Cameron, 1995. "Raising the Stakes in the Ultimatum Game: Experimental Evidence From Indonesia," Working Papers 724, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
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  9. Blount, Sally, 1995. "When Social Outcomes Aren't Fair: The Effect of Causal Attributions on Preferences," Organizational Behavior and Human Decision Processes, Elsevier, vol. 63(2), pages 131-144, August. [Downloadable!] (restricted)
  10. Dufwenberg, M. & Kirchsteiger, G., 1998. "A theory of sequential reciprocity," Discussion Paper 37, Tilburg University, Center for Economic Research. [Downloadable!]
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  11. Ernst Fehr & Simon Gaechter, 1999. "Cooperation and Punishment in Public Goods Experiments," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
    Other versions:
  12. repec:att:wimass:199325 is not listed on IDEAS
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  14. Guth, Werner & Schmittberger, Rolf & Schwarze, Bernd, 1982. "An experimental analysis of ultimatum bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 367-388, December. [Downloadable!] (restricted)
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  17. Simon, Herbert A, 1991. "Organizations and Markets," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 25-44, Spring. [Downloadable!] (restricted)
  18. 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)
  19. Josef Falkinger et al., 2000. "A Simple Mechanism for the Efficient Provision of Public Goods: Experimental Evidence," American Economic Review, American Economic Association, vol. 90(1), pages 247-264, March. [Downloadable!] (restricted)
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  20. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory Of Fairness, Competition, And Cooperation," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 817-868, August. [Downloadable!] (restricted)
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  21. David K. Levine, 1998. "Modeling Altruism and Spitefulness in Experiment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(3), pages 593-622, July. [Downloadable!] (restricted)
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  22. Werner Güth & Wolfgang Klose & Manfred Königstein & Joachim Schwalbach, 1998. "An experimental study of a dynamic principal-agent relationship," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 19(4-5), pages 327-341.
  23. 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)
  24. Herbert Gintis, 2000. "Strong Reciprocity and Human Sociality," Working Papers 2000-02, University of Massachusetts Amherst, Department of Economics. [Downloadable!]
  25. Ernst Fehr & Armin Falk, 1999. "Wage Rigidity in a Competitive Incomplete Contract Market," Journal of Political Economy, University of Chicago Press, vol. 107(1), pages 106-134, February. [Downloadable!] (restricted)
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  26. Josef Zweimueller & Rudolf Winter-Ebmer, . "Firm-specific Training: Consequences for Job Mobility," IEW - Working Papers iewwp037, Institute for Empirical Research in Economics - IEW. [Downloadable!]
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  27. Keser, Claudia & van Winden, Frans, 2000. " Conditional Cooperation and Voluntary Contributions to Public Goods," Scandinavian Journal of Economics, Blackwell Publishing, vol. 102(1), pages 23-39, March. [Downloadable!] (restricted)
  28. Bruno S. Frey & Alois Stutzer, . "Maximising Happiness?," IEW - Working Papers iewwp022, Institute for Empirical Research in Economics - IEW. [Downloadable!]
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  29. Sugden, Robert, 1984. "Reciprocity: The Supply of Public Goods through Voluntary Contributions," Economic Journal, Royal Economic Society, vol. 94(376), pages 772-87, December. [Downloadable!] (restricted)
  30. Theo Offerman, 1999. "Hurting hurts more than Helping helps: The Role of the Self-serving Bias," Tinbergen Institute Discussion Papers 99-018/1, Tinbergen Institute. [Downloadable!]
  31. Assar Lindbeck & Sten Nyberg & Jšrgen W. Weibull, 1999. "Social Norms And Economic Incentives In The Welfare State," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 1-35, February. [Downloadable!] (restricted)
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  32. Falk, Armin & Fischbacher, Urs, 2006. "A theory of reciprocity," Games and Economic Behavior, Elsevier, vol. 54(2), pages 293-315, February. [Downloadable!] (restricted)
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  33. Robert Slonim & Alvin E. Roth, 1998. "Learning in High Stakes Ultimatum Games: An Experiment in the Slovak Republic," Econometrica, Econometric Society, vol. 66(3), pages 569-596, May.
  34. North, Douglass C, 1991. "Institutions," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 97-112, Winter. [Downloadable!] (restricted)
  35. Gary E. Bolton & Axel Ockenfels, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March. [Downloadable!] (restricted)
  36. Bruno S. Frey & Lorenz Goette, . "Does Pay Motivate Volunteers?," IEW - Working Papers iewwp007, Institute for Empirical Research in Economics - IEW. [Downloadable!]
  37. 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)
  38. 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)
  39. Frey, Bruno S. & Stutzer, Alois, 2000. "Happiness, Economy and Institutions," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
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  40. Iris Bohnet & Bruno S. Frey & Steffen Huck, . "More Order with Less Law: On Contract Enforcement, Trust, and Crowding," IEW - Working Papers iewwp052, Institute for Empirical Research in Economics - IEW. [Downloadable!]
  41. Bewley, Truman F, 1995. "A Depressed Labor Market as Explained by Participants," American Economic Review, American Economic Association, vol. 85(2), pages 250-54, May. [Downloadable!] (restricted)
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