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A Tractable Model of Reciprocity and Fairness

Author

Listed:
  • James Cox

    (University of Arizona)

  • Daniel Friedman

    (University of California, Santa Cruz)

  • Steven Gjerstad

    (University of Arizona)

Abstract

We introduce a parametric model of other-regarding preferences. The income distribution and the kindness or unkindness of others' choices ('intentions') systematically affect a person's emotional state. The emotional state systematically affects the marginal rate of substitution between own and others' payoffs, and thus the person's subsequent choices. The model is applied to two sets of laboratory data: simple binary choice mini-ultimatum games, and Stackelberg duopoly games with a range of choices. The results confirm that other-regarding preferences respond to others' intentions as well as to the income distribution.

Suggested Citation

  • James Cox & Daniel Friedman & Steven Gjerstad, 2004. "A Tractable Model of Reciprocity and Fairness," Experimental 0406001, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpex:0406001
    Note: Type of Document - pdf; pages: 33
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    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D1 - Microeconomics - - Household Behavior
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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