EXPLAINING GIFT-EXCHANGE—THE LIMITS OF GOOD INTENTIONS

Nick Netzer and Armin Schmutzler

Journal of the European Economic Association, 2014, vol. 12, issue 6, 1586-1616

Abstract: This paper explores the limitations of intention-based social preferences as an explanation of gift-exchange between a firm and a worker. In a framework with one self-interested and one reciprocal player, gift-giving never arises in equilibrium. Instead, any equilibrium in a large class of multistage games must involve mutually unkind behavior of both players. Besides gift-exchange, this class of games also includes moral hazard models and the rotten kid framework. Even though equilibrium behavior may appear positively reciprocal in some of these games, the self-interested player never benefits from reciprocity. We discuss the relation of these results to the theoretical and empirical literature on gift-exchange in employment relations.

Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:bla:jeurec:v:12:y:2014:i:6:p:1586-1616

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