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Explaining Gift-Exchange—The Limits Of Good Intentions

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  • Nick Netzer
  • Armin Schmutzler

Abstract

This paper explores the limitations of intention-based social preferences as an explanation of gift-exchange between a firm and a worker. In a framework with one self-interested and one reciprocal player, gift-giving never arises in equilibrium. Instead, any equilibrium in a large class of multistage games must involve mutually unkind behavior of both players. Besides gift-exchange, this class of games also includes moral hazard models and the rotten kid framework. Even though equilibrium behavior may appear positively reciprocal in some of these games, the self-interested player never benefits from reciprocity. We discuss the relation of these results to the theoretical and empirical literature on gift-exchange in employment relations.

Suggested Citation

  • Nick Netzer & Armin Schmutzler, 2014. "Explaining Gift-Exchange—The Limits Of Good Intentions," Journal of the European Economic Association, European Economic Association, vol. 12(6), pages 1586-1616, December.
    • Handle: RePEc:bla:jeurec:v:12:y:2014:i:6:p:1586-1616
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    File URL: http://hdl.handle.net/10.1111/jeea.12086
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    Citations

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    Cited by:

    1. Friehe, Tim & Pham, Cat Lam, 2021. "Accident avoidance and settlement bargaining: The role of reciprocity," International Review of Law and Economics, Elsevier, vol. 68(C).
    2. Córdova, Angélica & Imas, Alex & Schwartz, Daniel, 2021. "Are non-contingent incentives more effective in motivating new behavior? Evidence from the field," Games and Economic Behavior, Elsevier, vol. 130(C), pages 602-615.
    3. Matthias Fahn, 2019. "Reciprocity in dynamic employment relationships," CESifo Working Paper Series 7634, CESifo.
    4. Bierbrauer, Felix & Netzer, Nick, 2016. "Mechanism design and intentions," Journal of Economic Theory, Elsevier, vol. 163(C), pages 557-603.
    5. Botond Köszegi, 2014. "Behavioral Contract Theory," Journal of Economic Literature, American Economic Association, vol. 52(4), pages 1075-1118, December.
    6. Boosey, Luke & Goerg, Sebastian, 2020. "The timing of discretionary bonuses – effort, signals, and reciprocity," Games and Economic Behavior, Elsevier, vol. 124(C), pages 254-280.
    7. Matthias Fahn & Anne Schade & Katharina Schüßler, 2017. "What Drives Reciprocal Behavior? The Optimal Provision of Incentives over the Course of Careers," CESifo Working Paper Series 6635, CESifo.
    8. von Siemens, Ferdinand A., 2013. "Intention-based reciprocity and the hidden costs of control," Journal of Economic Behavior & Organization, Elsevier, vol. 92(C), pages 55-65.
    9. Pierpaolo Battigalli & Martin Dufwenberg, 2022. "Belief-Dependent Motivations and Psychological Game Theory," Journal of Economic Literature, American Economic Association, vol. 60(3), pages 833-882, September.
    10. Mark T. Le Quement & Amrish Patel, 2018. "Communication as Gift-Exchange," University of East Anglia School of Economics Working Paper Series 2018-06, School of Economics, University of East Anglia, Norwich, UK..
    11. Dufwenberg, Martin & Kirchsteiger, Georg, 2019. "Modelling kindness," Journal of Economic Behavior & Organization, Elsevier, vol. 167(C), pages 228-234.
    12. Dhami, Sanjit & Wei, Mengxing & al-Nowaihi, Ali, 2023. "Classical and belief-based gift exchange models: Theory and evidence," Games and Economic Behavior, Elsevier, vol. 138(C), pages 171-196.
    13. Sebald, Alexander & Walzl, Markus, 2015. "Optimal contracts based on subjective performance evaluations and reciprocity," Journal of Economic Psychology, Elsevier, vol. 47(C), pages 62-76.

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