Trust, Reciprocity, and Favors in Cooperative Relationships

Atila Abdulkadiroglu and Kyle Bagwell

American Economic Journal: Microeconomics, 2013, vol. 5, issue 2, 213-59

Abstract: We study trust, reciprocity, and favors in a repeated trust game with private information. In our main analysis, players are willing to exhibit trust and thereby facilitate cooperative gains only if such behavior is regarded as a favor that must be reciprocated, either immediately or in the future. The size of a favor owed may decline over time, following neutral periods. Indeed, a favor-exchange relationship with this feature improves on a simple favor-exchange relationship. In some settings, an infrequent and symmetric punishment sustains greater cooperation. A honeymoon period followed by favor-exchange or symmetric punishment can also offer scope for improvement. (JEL C73, D82, Z13)

JEL-codes: C73 D82 Z13 (search for similar items in EconPapers)
Date: 2013
Note: DOI: 10.1257/mic.5.2.213
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Citations: View citations in EconPapers (22)

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