Cooperation and Reciprocity: a Theoretical Approach

Marcello Basili and Maurizio Franzini

No 91, Working Papers in Public Economics from Department of Economics and Law, Sapienza University of Roma

Abstract: Cooperation among genetically unrelated agents occurs in many situations where economic theory would not expect it. A too narrow conception of self-interest is widely considered the culprit. In particular, relying on experimental evidence in plenty, we consider strong reciprocity rules of behaviour, according to which it is worth bearing the cost of punishing those who defect, and we give analytical foundation to such behaviour – and more generally to cooperation-proneness. The basic idea is that most agents may include self-esteem in their utility function and actually produce or destroy self-esteem through their effective behaviour. The latter amounts to introducing a moral system in individual behaviour in such a way to make it amenable to rational maximization. We also show how the presence of cooperation-prone agents may impact on the best contract in Principal-Agents situations by altering the convenience of gift giving and trust.

Keywords: agency; altruism; self-interest; punishment; reciprocity. (search for similar items in EconPapers)
JEL-codes: D64 J41 (search for similar items in EconPapers)
Pages: 19
Date: 2005-11
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