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Towards an understanding of the relative strengths of positive and negative reciprocity

  • Omar Al-Ubaydli
  • Uri Gneezy
  • Min Sok Lee
  • John A. List

Scholars in economics and psychology have created a large literature studying reward, punishment and reciprocity. Labor markets constitute a popular application of this body of work, with particular emphasis on how reciprocity helps regulate workplace relationships where managers are unable to perfectly monitor workers. We study how idiosyncratic features of the labor market (compared to most scenarios in which reciprocity applies) affect the nature of worker reciprocity. In particular, we show how having an excess supply of workers (simulating unemployment) and managers who can observe the reciprocal behavior of workers and hire/fire them on that basis (simulating the reputational concerns inherent in labor market transactions) profoundly alters worker reciprocity. In the absence of reputational concerns, workers tend to reward kind behavior and punish unkind behavior by managers in approximately equal measure. In the presence of reputational concerns, workers exhibit a marked increase (decrease) in the propensity to reward kind (punish unkind) behavior by managers. We demonstrate how this is a consequence of workers and managers responding to changes in the strategic incentives to reward and punish. %JEL codes: D03, D63, J3, J53

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Article provided by Society for Judgment and Decision Making in its journal Judgment and Decision Making.

Volume (Year): 5 (2010)
Issue (Month): 7 (December)
Pages: 524-539

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Handle: RePEc:jdm:journl:v:5:y:2010:i:7:p:524-539
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  1. Houser, Daniel & Morton, Rebecca & Stratmann, Thomas, 2011. "Turned on or turned out? Campaign advertising, information and voting," European Journal of Political Economy, Elsevier, vol. 27(4), pages 708-727.
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