George Washington University - Department of Economics
University of Minnesota - Law School; University of Bologna
Journal of Institutional and Theoretical Economics, Vol. 159, No. 1, pp. 76-92, March 2003
George Mason Law & Economics Research Paper No. 02-13
The concept of reciprocity gains importance where there is no external authority to enforce agreements. Many legal systems foster meta-rules of reciprocity to facilitate cooperative outcomes. This paper considers the role of reciprocity rules in various strategic environments. We start by considering the effect of reciprocity constraints in a classic prisoner's dilemma with two symmetric parties and linear payoffs. We extend the analysis to continuous strategies and then further extend the basic model of reciprocity to a) asymmetric players, and (b) non-linear payoff functions. Then we examine the welfare properties of the reciprocity-induced equilibrium. In many game-theoretic situations, reciprocity facilitates the achievement of cooperative outcomes. Yet the reciprocity-induced equilibrium is not always socially optimal.
Number of Pages in PDF File: 36
Keywords: Reciprocity, Prisoner's Dilemma, Cooperation
JEL Classification: C7, K10
Date posted: May 25, 2002
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