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A Theory of Reciprocity
Armin Falk Institute for the Study of Labor (IZA); University of Bonn - Economic Science Area; CESifo (Center for Economic Studies and Ifo Institute for Economic Research) Urs Fischbacher University of Zurich - Faculty of Business Administration - Institute for Empirical Research in Economics (IEW) October 2001 CEPR Discussion Paper No. 3014 Abstract: This Paper presents a formal theory of reciprocity. Reciprocity means that people reward kind actions and punish unkind ones. The theory takes into account that people evaluate the kindness of an action not only by its consequences but also by the intention underlying this action. The theory explains the relevant stylized facts of a wide range of experimental games. Among them are the ultimatum game, the gift-exchange game, a reduced best-shot game, the dictator game, the prisoner's dilemma, and public goods games. Furthermore, the theory explains why the same consequences trigger different reciprocal responses in different environments. Finally, the theory explains why in bilateral interactions outcomes tend to be 'fair' whereas in competitive markets even extremely unfair distributions may arise.
Keywords: Reciprocity, fairness, cooperation, game theory JEL Classifications: C70, C91, C92, D64, H41 Working Paper SeriesDate posted: November 08, 2001 ; Last revised: November 15, 2001Suggested CitationContact Information
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