Journal
GAMES AND ECONOMIC BEHAVIOR
Volume 54, Issue 2, Pages 293-315Publisher
ACADEMIC PRESS INC ELSEVIER SCIENCE
DOI: 10.1016/j.geb.2005.03.001
Keywords
reciprocity; fairness; cooperation; competition; game theory
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People are reciprocal if they reward kind actions and punish unkind ones. In this paper we present a formal theory of reciprocity. It takes into account that people evaluate the kindness of an action not only by its consequences but also by its underlying intention. The theory is in line with the relevant stylized facts of a wide range of experimental games, such as the ultimatum game, the gift-exchange game, a reduced best-shot game, the dictator game, the prisoner's dilemma, and public goods games. Furthermore, it predicts that identical consequences trigger different reciprocal responses in different environments. Finally, the theory explains why outcomes tend to be fair in bilateral interactions whereas extremely unfair distributions may arise in competitive markets. (c) 2005 Elsevier Inc. All rights reserved.
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