Working Paper: CEPR ID: DP3018
Authors: Armin Falk; Simon Gächter
Abstract: Recent evidence highlights the importance of social norms in many economic relations. Many of these relationships are long-term and provide repeated game incentives for performance. We experimentally investigate interaction effects of reciprocity and repeated game incentives in two treatments (one-shot and repeated) of a gift-exchange game. In both treatments we observe reciprocity, which is strengthened in the repeated game. A detailed analysis shows that in the repeated game some subjects imitate reciprocity. Thus, reciprocity and repeated game incentives reinforce each other. Observed behaviour is robust against experience. We conclude that a long-term interaction is a ?reciprocity-compatible? contract enforcement device.
Keywords: incomplete contracts; reciprocity; repeated games; reputation
JEL Codes: C91; J30
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| repeated interactions (C73) | reciprocity (Z13) |
| reciprocity (Z13) | effort (H) (D29) |
| reciprocity (Z13) | cooperative behavior (H) (C71) |
| wages (J31) | effort (OS) (D29) |
| wages (J31) | effort (H) (D29) |