Fairness and Retaliation: The Economics of Reciprocity

Ernst Fehr () and Simon Gaechter
Authors registered in the RePEc Author Service: Simon Gächter ()

No 336, CESifo Working Paper Series from CESifo Group Munich

Abstract: 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 incentive inefficient because the incentives may crowd out voluntary co-operation. It strongly limits the effects to 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.

Date: 2000
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Related works:
Journal Article: Fairness and Retaliation: The Economics of Reciprocity (2000)
Working Paper: Fairness and Retaliation: The Economics of Reciprocitys
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