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A Theory of Fairness, Competition and Cooperation


Ernst Fehr


University of Zurich - Department of Economics

March 1998

Zurich IEER Working Paper No. 4

Abstract:     
There is strong evidence that people exploit their bargaining power in competitive markets but not in bilateral bargaining situations. There is also strong evidence that people exploit free-riding opportunities in voluntary cooperation games. Yet, when they are given the opportunity to punish free riders, stable cooperation is maintained although punishment is costly for those who punish. This paper asks whether there is a simple common principle that can explain this puzzling evidence. We show that if a fraction of the people exhibits inequality aversion the puzzles can be resolved.

Number of Pages in PDF File: 52

JEL Classification: C78, D43, H41, C90

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Date posted: August 23, 1998  

Suggested Citation

Fehr, Ernst, A Theory of Fairness, Competition and Cooperation (March 1998). Zurich IEER Working Paper No. 4. Available at SSRN: http://ssrn.com/abstract=106228 or http://dx.doi.org/10.2139/ssrn.106228

Contact Information

Ernst Fehr (Contact Author)
University of Zurich - Department of Economics ( email )
Blümlisalpstrasse 10
Zuerich, 8006
Switzerland
+41 1 634 3709 (Phone)
+41 1 634 4907 (Fax)
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