A Theory of Fairness, Competition and Cooperation

Ernst Fehr and Klaus M. Schmidt

No 1812, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: There is strong evidence that people exploit their bargaining power in competitive markets but not in bilateral bargaining situations. There is also strong evidence that people exploit free-riding opportunities in voluntary cooperation games. Yet, when they are given the opportunity to punish free riders, stable cooperation is maintained although punishment is costly for those who punish. This paper asks whether there is a simple common principle that can explain this puzzling evidence. We show that if a fraction of the people exhibits inequality aversion the puzzles can be resolved.

Keywords: Bargaining; experimental economics; Public Goods; Reciprocity; utility theory (search for similar items in EconPapers)
JEL-codes: C78 C90 D43 H41 (search for similar items in EconPapers)
Date: 1998-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Related works:
Journal Article: A Theory of Fairness, Competition, and Cooperation (1999)
Working Paper: A theory of fairness, competition, and cooperation (1999)
Chapter: A theory of fairness, competition, and cooperation
Working Paper: A Theory of Fairness, Competition and Cooperation
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