Towards an Understanding of the Relative Strengths of Positive and Negative Reciprocity

Judgment and Decision Making, Vol. 5, pp. 524-539, December 2010

16 Pages Posted: 3 Jan 2011

See all articles by Omar Al-Ubaydli

Omar Al-Ubaydli

George Mason University - Department of Economics; Derasat; George Mason University - Mercatus Center

John A. List

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Uri Gneezy

University of California, San Diego (UCSD) - Rady School of Management

Min Sok Lee

University of Chicago - Department of Economics

Date Written: December 29, 2010

Abstract

Scholars in economics and psychology have created a large literature studying reward, punishment and reciprocity. Labor markets constitute a popular application of this body of work, with particular emphasis on how reciprocity helps regulate workplace relationships where managers are unable to perfectly monitor workers.

We study how idiosyncratic features of the labor market (compared to most scenarios in which reciprocity applies) affect the nature of worker reciprocity. In particular, we show how having an excess supply of workers (simulating unemployment) and managers who can observe the reciprocal behavior of workers and hire/fire them on that basis (simulating the reputational concerns inherent in labor market transactions) profoundly alters worker reciprocity. In the absence of reputational concerns, workers tend to reward kind behavior and punish unkind behavior by managers in approximately equal measure. In the presence of reputational concerns, workers exhibit a marked increase (decrease) in the propensity to reward kind (punish unkind) behavior by managers. We demonstrate how this is a consequence of workers and managers responding to changes in the strategic incentives to reward and punish.

Keywords: Reciprocity, Reputation, Reward, Punishment, Gift-Exchange

Suggested Citation

Al-Ubaydli, Omar and List, John A. and Gneezy, Uri and Lee, Min Sok, Towards an Understanding of the Relative Strengths of Positive and Negative Reciprocity (December 29, 2010). Judgment and Decision Making, Vol. 5, pp. 524-539, December 2010, Available at SSRN: https://ssrn.com/abstract=1733971

Omar Al-Ubaydli (Contact Author)

George Mason University - Department of Economics ( email )

4400 University Drive
Fairfax, VA 22030
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703-993-4538 (Phone)
703-993-1133 (Fax)

Derasat ( email )

Bahrain

George Mason University - Mercatus Center ( email )

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Arlington, VA 22201
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John A. List

University of Chicago - Department of Economics ( email )

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Chicago, IL 60637
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
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IZA Institute of Labor Economics

P.O. Box 7240
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Germany

Uri Gneezy

University of California, San Diego (UCSD) - Rady School of Management ( email )

9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States

Min Sok Lee

University of Chicago - Department of Economics ( email )

1126 East 59th Street
Chicago, IL 60637
United States

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