A Tractable Model of Reciprocity and Fairness

Andrew Young School of Policy Studies Research Paper Series No. 06-21

UC Santa Cruz Economics Working Paper No. 531

43 Pages Posted: 4 Mar 2003

See all articles by James C. Cox

James C. Cox

Georgia State University - Department of Economics

Daniel Friedman

University of California, Santa Cruz - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Steven Gjerstad

Purdue University

Date Written: February 2006

Abstract

We introduce a parametric model of other-regarding preferences in which my emotional state determines the marginal rate of substitution between my own and others' payoffs, and thus my subsequent choices. In turn, my emotional state responds to relative status and to the kindness or unkindness of others' choices. Structural estimations of this model with six existing data sets demonstrate that other-regarding preferences depend on status, reciprocity, and perceived property rights.

Suggested Citation

Cox, James C. and Friedman, Daniel and Gjerstad, Steven, A Tractable Model of Reciprocity and Fairness (February 2006). Andrew Young School of Policy Studies Research Paper Series No. 06-21, UC Santa Cruz Economics Working Paper No. 531, Available at SSRN: https://ssrn.com/abstract=376981 or http://dx.doi.org/10.2139/ssrn.376981

James C. Cox

Georgia State University - Department of Economics ( email )

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Daniel Friedman (Contact Author)

University of California, Santa Cruz - Department of Economics ( email )

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CESifo (Center for Economic Studies and Ifo Institute)

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Steven Gjerstad

Purdue University ( email )

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United States