Fairness and Retaliation: The Economics of Reciprocity
University of Zurich - Department of Economics
CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics
IEER Working Paper No. 40
This paper shows that reciprocity has powerful implications for many economic domains. It is an important determinant in the enforcement of contracts and social norms and enhances the possibilities of collective action greatly. Reciprocity may render the provision of explicit incentives inefficient because the incentives may crowd out voluntary co-operation. It strongly limits the effects of competition in markets with incomplete contracts and gives rise to noncompetitive wage differences. Finally, reciprocity it is also a strong force contributing to the existence of incomplete contracts.
Number of Pages in PDF File: 30
JEL Classification: D89
Date posted: June 28, 2000