A test of loyalty

Renaud Foucart and Jonathan Tan

Theory and Decision, 2024, vol. 97, issue 1, No 6, 109-137

Abstract: Abstract We propose and test a model of loyalty in games. Players can mutually maintain loyalty by working towards a common goal that is pareto-superior to any Nash equilibrium without it. Loyalty imposes a psychological cost on defecting in an ongoing cooperation, which is thus sustained. We distinguish loyalty from reciprocity and explain how it complements guilt aversion with two dynamic games from a field experiment conducted in a Pakistani factory. The evidence supports the validity of loyalty, which has a stronger effect within than between groups.

Keywords: Loyalty; Cooperation; Trust; Reciprocity; Field experiment (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s11238-023-09966-4

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