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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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    Cited by:

    1. 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.
    2. Bierbrauer, Felix & Netzer, Nick, 2016. "Mechanism design and intentions," Journal of Economic Theory, Elsevier, vol. 163(C), pages 557-603.
    3. Botond Köszegi, 2014. "Behavioral Contract Theory," Journal of Economic Literature, American Economic Association, vol. 52(4), pages 1075-1118, December.
    4. 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 Group Munich.

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