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Reputation and Reciprocity: Consequences for the Labour Relation

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  • Gachter, Simon
  • Falk, Armin

Abstract

Recent evidence highlights the importance of social norms in many economic relations. However, many of these relationships are long term and provide repeated game incentives for performance. We experimentally investigate interaction effects of reciprocity and repeated game incentives in two treatments (one-shot and repeated) of a gift-exchange game. In both treatments we observe reciprocity, which is strengthened in the repeated game. A detailed analysis shows that, in the repeated game, some subjects imitate reciprocity. Thus, reciprocity and repeated game incentives reinforce each other. Observed behavior is robust against experience. We conclude that long-term interaction is a "reciprocity-compatible" contract enforcement device. Copyright 2002 by The editors of the Scandinavian Journal of Economics.

Suggested Citation

  • Gachter, Simon & Falk, Armin, 2002. " Reputation and Reciprocity: Consequences for the Labour Relation," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(1), pages 1-26.
  • Handle: RePEc:bla:scandj:v:104:y:2002:i:1:p:1-26
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    References listed on IDEAS

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    1. Cooper, Russell & DeJong, Douglas V. & Forsythe, Robert & Ross, Thomas W., 1996. "Cooperation without Reputation: Experimental Evidence from Prisoner's Dilemma Games," Games and Economic Behavior, Elsevier, vol. 12(2), pages 187-218, February.
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    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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