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Reputation and Reciprocity: Consequences for Labour Relations

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  • Falk, Armin
  • Gächter, Simon

Abstract

Recent evidence highlights the importance of social norms in many economic relations. 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 behaviour is robust against experience. We conclude that a long-term interaction is a ‘reciprocity-compatible’ contract enforcement device.

Suggested Citation

  • Falk, Armin & Gächter, Simon, 2001. "Reputation and Reciprocity: Consequences for Labour Relations," CEPR Discussion Papers 3018, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:3018
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Fehr, Ernst & Falk, Armin, 2002. "Psychological foundations of incentives," European Economic Review, Elsevier, vol. 46(4-5), pages 687-724, May.
    2. Frederico Finan & Laura Schechter, 2012. "Vote‐Buying and Reciprocity," Econometrica, Econometric Society, vol. 80(2), pages 863-881, March.
    3. Uwe Jirjahn & Vanessa Lange, 2015. "Reciprocity and Workers’ Tastes for Representation," Journal of Labor Research, Springer, vol. 36(2), pages 188-209, June.
    4. Uri Gneezy & John A List, 2006. "Putting Behavioral Economics to Work: Testing for Gift Exchange in Labor Markets Using Field Experiments," Econometrica, Econometric Society, vol. 74(5), pages 1365-1384, September.
    5. Kleine, Fabian & Königstein, Manfred & Rozsnyói, Balázs, 2014. "Voluntary leadership in an experimental trust game," Journal of Economic Behavior & Organization, Elsevier, vol. 108(C), pages 442-452.
    6. Samuel Bowles & Sandra Polanía Reyes, 2009. "Economic Incentives and Social Preferences: A preference-Based Lucas Critique of Public Policy," UMASS Amherst Economics Working Papers 2009-11, University of Massachusetts Amherst, Department of Economics.
    7. Samuel Bowles & Sandra Polanía Reyes, 2009. "Economic Incentives and Social Preferences: A Preference-based Lucas Critique of Public Policy," CESifo Working Paper Series 2734, CESifo Group Munich.

    More about this item

    Keywords

    incomplete contracts; reciprocity; repeated games; reputation;

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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