Voluntary Interaction and the Principle of Mutual Benefit

Andrea Isoni, Robert Sugden and Jiwei Zheng

Journal of Political Economy, 2023, vol. 131, issue 6, 1576 - 1616

Abstract: Most social preference theories are based on observations of nonvoluntary interactions. Nonselfish behavior may take fundamentally different forms in voluntary interactions, such as market transactions. We investigate the “Principle of Mutual Benefit”—an injunctive norm requiring individuals who enter interactions voluntarily to conform to common expectations about behavior within them. This norm induces patterns of behavior inconsistent with existing social preference theories and allows extrinsic incentives to crowd in trustworthiness. We embed this norm in a model consistent with evidence about promise keeping, gift exchange, and “avoiding the ask.” We present new experimental evidence that people adhere to it.

Date: 2023
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