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Reputation and Reciprocity: Consequences for the Labour Relation

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  • Simon Gaechter
  • Armin Falk

Abstract

Recent evidence highlights the importance of social norms in many economic relations. However, 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

  • Simon Gaechter & Armin Falk, "undated". "Reputation and Reciprocity: Consequences for the Labour Relation," IEW - Working Papers 019, Institute for Empirical Research in Economics - University of Zurich.
  • Handle: RePEc:zur:iewwpx:019
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    References listed on IDEAS

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    1. Cooper, Russell & DeJong, Douglas V. & Forsythe, Robert & Ross, Thomas W., 1996. "Cooperation without Reputation: Experimental Evidence from Prisoner's Dilemma Games," Games and Economic Behavior, Elsevier, vol. 12(2), pages 187-218, February.
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    Keywords

    reciprocity; reputation; repeated games; incomplete contracts;

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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