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Reputation and Reciprocity: Consequences for Labour Relations

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  • Gächter, Simon
  • Falk, Armin

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

  • Gächter, Simon & Falk, Armin, 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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    More about this item

    Keywords

    Reciprocity; Reputation; Repeated games; Incomplete contracts;
    All these keywords.

    JEL classification:

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

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