Reciprocity-Induced Cooperation

36 Pages Posted: 25 May 2002  

Vincy Fon

George Washington University - Department of Economics

Francesco Parisi

University of Minnesota - Law School; University of Bologna

Abstract

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.

Keywords: Reciprocity, Prisoner's Dilemma, Cooperation

JEL Classification: C7, K10

Suggested Citation

Fon, Vincy and Parisi, Francesco, Reciprocity-Induced Cooperation. Journal of Institutional and Theoretical Economics, Vol. 159, No. 1, pp. 76-92, March 2003; George Mason Law & Economics Research Paper No. 02-13. Available at SSRN: https://ssrn.com/abstract=313180 or http://dx.doi.org/10.2139/ssrn.313180

Vincy Fon

George Washington University - Department of Economics ( email )

2115 G Street, N.W.
Monroe Hall, #366
Washington, DC 20052
United States
202-994-7580 (Phone)
202-994-6147 (Fax)

Francesco Parisi (Contact Author)

University of Minnesota - Law School ( email )

229 19th Avenue South
Minneapolis, MN 55455
United States

University of Bologna ( email )

Piazza Scaravilli 1
40126 Bologna, fc 47100
Italy

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