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No contract or unfair contract: What's better?

  • Bruttel, Lisa
  • Eisenkopf, Gerald

We investigate the welfare implications of unfair incentive contracts in comparison with interactions without contracts. Reciprocal people should cooperate conditionally in the latter situation but punish unfairness by non-cooperation. We confirm that some people do cooperate conditionally in a sequential prisoner's dilemma. Furthermore, some subjects do not cooperate if they face an unfair incentive contract in a similar context. However, there is no correlation between these two types of reciprocity. At an aggregate level, all contracts – no matter how fair they are – improve welfare even if agents are conditionally cooperative.

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File URL: http://www.sciencedirect.com/science/article/pii/S1053535712000340
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Article provided by Elsevier in its journal Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics).

Volume (Year): 41 (2012)
Issue (Month): 4 ()
Pages: 384-390

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Handle: RePEc:eee:soceco:v:41:y:2012:i:4:p:384-390
DOI: 10.1016/j.socec.2012.04.014
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620175

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