Reciprocity as a contract enforcement device: experimental evidence
Numerous experimental studies indicate that people tend to reciprocate favors and punish unfair behavior. It is hypothesized that these behavioral responses contribute to the enforcement of contracts and increase gains from trade. It turns out that, if only one side of the market has opportunities for reciprocal responses, the impact of reciprocity on contract enforcement depends on the details of the pecuniary incentive system. If both sides of the market have opportunities for reciprocal responses, robust and powerful reciprocity effects occur. In particular, reciprocal behavior causes a substantial increase in the set of enforceable actions and large efficiency gains.
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| Length: | |
| Date of creation: | Jul 1997 |
| Publication status: | Published in: Econometrica (1997) v.65 n° 4,p.833-860 |
| Handle: | RePEc:ulb:ulbeco:2013/5911 |
| Contact details of provider: | Postal: CP135, 50, avenue F.D. Roosevelt, 1050 Bruxelles Web page: http://difusion.ulb.ac.be More information through EDIRC
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References listed on IDEAS
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- Ernst Fehr & Georg Kirchsteiger & Arno Riedl, 1993.
"Does Fairness Prevent Market Clearing? An Experimental Investigation,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 108(2), pages 437-459.
- Georg Kirchsteiger & Ernst Fehr & Arno Riedl, 1993. "Does Fairness Prevent Market Clearing? An Experimental Investigation," ULB Institutional Repository 2013/5927, ULB -- Universite Libre de Bruxelles.
- Guth, Werner, 1995. "An Evolutionary Approach to Explaining Cooperative Behavior by Reciprocal Incentives," International Journal of Game Theory, Springer;Game Theory Society, vol. 24(4), pages 323-344.
- Grossman, Sanford J & Hart, Oliver D, 1983. "An Analysis of the Principal-Agent Problem," Econometrica, Econometric Society, vol. 51(1), pages 7-45, January.
- Sanford Grossman & Oliver Hart, "undated". "An Analysis of the Principal-Agent Problem," Rodney L. White Center for Financial Research Working Papers 15-80, Wharton School Rodney L. White Center for Financial Research.
- Sanford J Grossman & Oliver D Hart, 2001. "An Analysis of the Principal-Agent Problem," Levine's Working Paper Archive 391749000000000339, David K. Levine.
- repec:fth:prinin:345 is not listed on IDEAS
- Berg Joyce & Dickhaut John & McCabe Kevin, 1995. "Trust, Reciprocity, and Social History," Games and Economic Behavior, Elsevier, vol. 10(1), pages 122-142, July. Full references (including those not matched with items on IDEAS)
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