Advertisement

Fairness and Retaliation

  • Ernst Fehr
  • Simon Gächter
Chapter
Part of the International Economic Association Series book series (IEA)

Abstract

In this chapter we examine evidence from different social sciences and argue that considerations of fairness and retaliation shape human behaviour to a very large degree. We contend that the importance of fairness and retaliation also extends to many important economic decisions. The incorporation of these motivations therefore helps us to understand economic outcomes in many different institutional environments.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Abbink, K., Irlenbusch, B. and Renner, E. (1997) ‘The Moonlighting Game’, forthcoming in: Journal of Economic Behavior and Organization.Google Scholar
  2. Agell, J. and Lundborg, P. (1995) ‘Theories of Pay and Unemployment: Survey Evidence from Swedish Manufacturing Firms’, Scandinavian Journal of Economics, vol. 97, pp. 295–308.CrossRefGoogle Scholar
  3. Akerlof, G. (1980) ‘A Theory of Social Custom, of which Unemployment May Be One Consequence’, Quarterly Journal of Economics, vol. 90, pp. 749–75.CrossRefGoogle Scholar
  4. Akerlof, G. (1982) ‘Labour Contracts as Partial Gift Exchange’, Quarterly Journal of Economics, vol. 97, pp. 543–69.CrossRefGoogle Scholar
  5. Akerlof, G. (1997) ‘Social Distance and Social Decisions’, Econometrica, vol. 65, pp. 1005–27.CrossRefGoogle Scholar
  6. Baker, G. (1992) ‘Incentive Contracts and Performance Measurement’, Journal of Political Economy, vol. 100, pp. 598–614.CrossRefGoogle Scholar
  7. Baker, G, Jensen, M. and Murphy, K. (1998) ‘Compensation and Incentives: Practice vs Theory’, Journal of Finance, vol. 62, pp. 593–616.Google Scholar
  8. Berg, J. and Dickhaut, J. and McCabe, K. (1995) ‘Trust Reciprocity and Social History’, Games and Economic Behavior, vol. 10, pp. 122–42.CrossRefGoogle Scholar
  9. Bewley, T. (1995) ‘A Depressed Labor Market as Explained by Participants’, American Economic Review, Papers and Proceedings, vol. 85, pp. 250–4.Google Scholar
  10. Blanchflower, D., Oswald, A. and Sanfey, P. (1996) ‘Wages, Profits, and Rent-Sharing’, Quarterly Journal of Economics, vol. 111, no. 2, pp. 227–52.CrossRefGoogle Scholar
  11. Blinder, A. and Choi, D. (1990) ‘A Shred of Evidence on Theories of Wage Stickiness’, Quarterly Journal of Economics, vol. 105, pp. 1003–16.CrossRefGoogle Scholar
  12. Blount, S. (1995) ‘When Social Outcomes Aren’t Fair: The Effect of Causal Attributions on Preferences’, Organizational Behavior and Human Decision Processes, vol. 63, no. 2, pp. 131–44.CrossRefGoogle Scholar
  13. Bolton, G. and Zwick, R. (1995) ‘Anonymity versus Punishment in Ultimatum Bargaining’, Games and Economic Behavior, vol. 10, no. 1, pp. 95–121.CrossRefGoogle Scholar
  14. Bolton, G. and Ockenfels, A. (2000) ‘ERC — A Theory of Equity, Reciprocity, and Competition’, vol. 90, no. 1, pp. 166–94 American Economic Review.Google Scholar
  15. Borjas, G. (1995) ‘Ethnicity, Neighbourhoods, and Human-Capital Externalities’, American Economic Review, vol. 85, pp. 365–90.Google Scholar
  16. Bowles, S. and Gintis, H. (1998) ‘How Communities Govern: The Structural Basis of Pro-Social Norms’, in A. Ben-Ner and L. Putterman (eds), Economics, Values and Organizations: Cambridge University Press.Google Scholar
  17. Cameron, L. (1999) ‘Raising the Stakes in the Ultimatum Game: Experimental Evidence from Indonesia’, Economic Inquiry vol. 37, no. 1, pp. 209–19.CrossRefGoogle Scholar
  18. Campbell, C. and Kamlani, K. (1997) ‘The Reasons for Wage Rigidity: Evidence from a Survey of Firms’, Quarterly Journal of Economics, vol. 112, pp. 759–89.CrossRefGoogle Scholar
  19. Charness, G. (1996) ‘Attribution and Reciprocity in a Labour Market: An Experimental Investigation’, mimeo, Berkeley, Calif.: University of California Press.Google Scholar
  20. Deci, E. and Ryan, R. (1985) Intrinsic Motivation and Self-Determination in Human Behaviour, New York and London: Plenum Press.CrossRefGoogle Scholar
  21. De Waal, F. (1991) ‘The Chimpanzee’s Sense of Social Regularity and its Relation to the Human Sense of Justice’, American Behavioral Scientist, vol. 34, no. 3, pp. 335–49.CrossRefGoogle Scholar
  22. Dufwenberg, M. and Kirchsteiger, G. (1998) ‘A Theory of Sequential Reciprocity’, Discussion Paper: Tilburg Center.Google Scholar
  23. Elster, J. (1989) The Cement of Society — A Study of Social Order: Cambridge University Press.CrossRefGoogle Scholar
  24. Falk, A. and Fischbacher, U. (1999) ‘A Theory of Reciprocity’, mimeo: University of Zurich.Google Scholar
  25. Falk, A., Gächter, S. and Kovacs, J. (1999) ‘Intrinsic Motivation and Extrinsic Incentives in a Repeated Game with Incomplete Contracts’, Journal of Economic Psychology, vol. 20, pp. 251–284.CrossRefGoogle Scholar
  26. Falkinger, F., Fehr, E., Gächter, S. and Winter-Ebmer, R. (2000) ‘A simple mechanism for the Efficient Provision of Public Goods: Experimental Evidence, American Economic Review, vol. 90, no. 1, pp. 247–64.CrossRefGoogle Scholar
  27. Fehr, E. and Falk, A. (1999) ‘Wage Rigidity in a Competitive Incomplete Contract Market’, Journal of Political Economy, vol. 107, no. 1, pp. 106–34.CrossRefGoogle Scholar
  28. Fehr, E. and Gächter, S. (1998) ‘How Effective are Trust- and Reciprocity-Based Incentives?’, in A. Ben-Ner and L. Putterman (eds), Economics, Values and Organizations: Cambridge University Press.Google Scholar
  29. Fehr, E. and Schmidt, K. (1999) ‘A Theory of Fairness, Competition, and Cooperation’, Quarterly Journal of Economics, vol. 114(3), pp. 817–68.CrossRefGoogle Scholar
  30. Fehr, E. and Tougareva, E. (1995) ‘Do High Stakes Remove Reciprocal — Fairness Evidence from Russia’, Discussion paper: University of Zurich.Google Scholar
  31. Fehr, E., Gächter, S. and Kirchsteiger, G. (1996) ‘Reciprocal Fairness and Noncompensating Wage Differentials’, Journal of Institutional and Theoretical Economics, vol. 152, no. 4, pp. 608–40.Google Scholar
  32. Fehr, E., Gächter, S. and Kirchsteiger, G. (1997) ‘Reciprocity as a Contract Enforcement Device’, Econometrica, vol. 65, no. 4, pp. 833–60.CrossRefGoogle Scholar
  33. Fehr, E., Kirchsteiger, G. and Riedl, A. (1993) ‘Does Fairness Prevent Market Clearing? An Experimental Investigation’, Quarterly Journal of Economics, vol. 108, no. 2, pp. 437–60.CrossRefGoogle Scholar
  34. Fehr, E., Kirchler, E., Weichbold, A. and Gächter, S. (1998) ‘When Social Norms Overpower Competition — Gift Exchange in Experimental Labor Markets’, Journal of Labor Economics, vol. 16, pp. 324–51.CrossRefGoogle Scholar
  35. Frey, B. (1997) Not Just For the Money — An Economic Theory of Personal Motivation, Cheltenham: Edward Elgar.Google Scholar
  36. Frank, R. (1998) ‘Social Norms as Positional Arms Control Agreements’, in A. Ben-Ner and L. Putterman (eds), Economics, Values and Organizations: Cambridge University Press.Google Scholar
  37. Gächter, S. and Falk, A. (1999) ‘Reputation or Reciprocity?’, Working Paper no. 19: University of Zurich.Google Scholar
  38. Gale, J., Binmore, K. and Samuelson, L. (1995) ‘Learning to Be Imperfect: The Ultimatum Game’, Games and Economic Behavior, vol. 8, pp. 56–90.CrossRefGoogle Scholar
  39. Glaeser, E., Sacerdote, B. and Scheinkman, J. (1996) ‘Crime and Social Interactions’, Quarterly Journal of Economics, vol. 111, pp. 507–48.CrossRefGoogle Scholar
  40. Güth, W. (1995a) ‘An Evolutionary Approach to Explaining Cooperative Behaviour by Reciprocal Incentives’, International Journal of Game Theory, vol. 24, pp. 323–44.CrossRefGoogle Scholar
  41. Güth, W. (1995b) ‘On Ultimatum Bargaining Experiments — A Personal Review’, Journal of Economic Behaviour and Organization, vol. 27, pp. 329–44.CrossRefGoogle Scholar
  42. Güth, W. and Huck, S. (1997) ‘From Ultimatum Bargaining to Dictatorship — An Experimental Study of Four Games Varying in Veto Power’, Metroeconomica, vol. 48, pp. 262–79.CrossRefGoogle Scholar
  43. Güth, W., Huck, S. and Ockenfels, P. (1996) ‘Two-level Ultimatum Bargaining with Incomplete Information’, Economic Journal, vol. 106, pp. 593–604.CrossRefGoogle Scholar
  44. Güth, W., Schmittberger, R. and Schwarze, B. (1982) ‘An Experimental Analysis of Ultimatum Bargaining’, Journal of Economic Behavior and Organization, vol. 3, no. 3, pp. 367–88.CrossRefGoogle Scholar
  45. Hart, O. (1995) Firms, Contracts, and Financial Structure: Oxford University Press.CrossRefGoogle Scholar
  46. Hessing, D., Elffers, H., Robben, H. and Webley, P. (1993) ‘Needy or Greedy? The Social Psychology of Individuals Who Fraudulently Claim Unemployment Benefits’, Journal of Applied Social Psychology, vol. 23, pp. 226–43.CrossRefGoogle Scholar
  47. Hildreth, A. and Oswald, A. (1997) ‘Rent sharing and wages: evidence from company and establishment panels’. Journal of Labour Economics, vol. 15, pp. 318–37.CrossRefGoogle Scholar
  48. Hoffman, E., McCabe, K. and Smith, V. (1996) ‘On Expectations and Monetary Stakes in Ultimatum Games’, International Journal of Game Theory, vol. 25, pp. 289–301.CrossRefGoogle Scholar
  49. Holländer, H. (1990) ‘A Social Exchange Approach to Voluntary Cooperation’, American Economic Review, vol. 80, pp. 1157–67.Google Scholar
  50. Holmström, B. and Milgrom, P. (1991) ‘Multi-Task Principal-Agent Analyses: Incentive Contracts, Asset Ownership and Job-Design’, Journal of Law, Economics and Organization, vol. 7, pp. 24–52.CrossRefGoogle Scholar
  51. Huck, S. and Oechssler, J. (1999) ‘The Indirect Evolutionary Approach to Explaining Fair Allocations’, Games and Economic Behavior, vol 28, pp. 13–24.CrossRefGoogle Scholar
  52. Jacobsen, E. and Sadriech, A. (1996) ‘Experimental Proof for the Motivational Importance of Reciprocity’, Discussion Paper No. B-386: University of Bonn.Google Scholar
  53. Jones, S. (1984) The Economics of Conformism, Oxford: Basil Blackwell.Google Scholar
  54. Kagel, J., Kim, C. and Moser, D. (1996) ‘Fairness in Ultimatum Games with Asymmetric Information and Asymmetric Payoffs’, Games and Economic Behavior, vol. 13, pp. 100–10.CrossRefGoogle Scholar
  55. Kandel, E. and Lazear, E. (1992) ‘Peer Pressure and Partnerships’, Journal of Political Economy, vol. 100, pp. 801–17.CrossRefGoogle Scholar
  56. Knack, S. (1992) ‘Civic Norms, Social Sanctions, and Voter Turnout’, Rationality and Society, vol. 4, pp. 133–56.CrossRefGoogle Scholar
  57. Knack, S. and Keefer, P. (1997) ‘Does Social Capital Have an Economic Payoff? A Crosscountry Investigation’, Quarterly Journal of Economics, vol. 112, pp. 1251–88.CrossRefGoogle Scholar
  58. Kolm, S. (1984) La Bonne Economic La Réciprocité Générale, Paris: Presses Universitaires de France.Google Scholar
  59. Kolm, S. (1994) ‘The Theory of Reciprocity and the Choice of Economic Systems: An Introduction’, Investigationes Económicas, vol. 18, pp. 67–95.Google Scholar
  60. Krueger, A. and Summers, L. (1988) ‘Efficiency Wages and the Inter-industry Wage Structure’, Econometrica, vol. 56, pp. 259–94.CrossRefGoogle Scholar
  61. Levine, D. (1993) ‘Fairness, Markets, and Ability to Pay: Evidence from Compensation Executives’, American Economic Review, vol. 83, no. 5, pp. 1241–59.Google Scholar
  62. Lindbeck, A., Nyberg, S. and Weibull, J. (1999) ‘Social Norms and Economic Incentives in the Welfare State’, Quarterly Journal of Economics vol. 114, no. 1, pp. 1–35.CrossRefGoogle Scholar
  63. Malcomson, J. (1997) ‘Contracts, Hold-up, and Labour Markets’, Journal of Economic Literature, vol. 35, pp. 1916–57.Google Scholar
  64. Marsden, D. (1986) The End of Economic Man? Custom and Competition in Labour Markets, Brighton: Wheatsheaf Books.Google Scholar
  65. Milgrom, P. and Roberts, J. (1992) Economics, Organization and Management, New Jersey: Prentice-Hall International.Google Scholar
  66. Miller, S. (1997) ‘Strategienuntersuchung zum Investitionsspiel von Berg, Dickhaut, McCabe’, Diplomarbeit, University of Bonn.Google Scholar
  67. Mitzkewitz, M. and Nagel, R. (1993) ‘Experimental Results on Ultimatum Games with Incomplete Information’, International Journal of Game Theory, vol. 22, no. 2, pp. 171–98.CrossRefGoogle Scholar
  68. Ostrom, E. (1990) Governing the Commons — The Evolution of Institutions for Collective Action: Cambridge University Press.CrossRefGoogle Scholar
  69. Roethlisberger, F.J. and Dickson, W.J. (1947) Management and the Worker: An Account of a Research Program Conducted by the Western Electric Company, Hawthorne Works, Chicago, Cambridge, Mass: Harvard University Press.Google Scholar
  70. Roth, A. (1995) ‘Bargaining Experiments’, in A. Roth and J. Kagel (eds); Handbook of Experimental Economics, Princeton, NJ: Princeton University Press.Google Scholar
  71. Roth, A., Prasnikar, V., Okuno-Fujiwara, M. and Zamir, S. (1991) ‘Bargaining and Market Behaviour in Jerusalem, Ljubljana, Pittsburgh, and Tokyo: An Experimental Study’, American Economic Review, vol. 81, pp. 1068–95.Google Scholar
  72. Slonim, R. and Roth, A. (1998) ‘Financial Incentives and Learning in Ultimatum and Market Games: An Experiment in the Slovak Republic’, Econometrica, vol. 66, pp. 569–96.CrossRefGoogle Scholar
  73. Solow, R. (1990) The Labour Market as a Social Institution, Oxford: Basil Blackwell.Google Scholar
  74. Suleiman, R. (1996) ‘Expectations and Fairness in a Modified Ultimatum Game’, Journal of Economic Psychology, vol. 17, pp. 531–54.CrossRefGoogle Scholar
  75. Veblen, T. (1899) The Theory of the Leisure Class, Boston, Mass: Houghton Mifflin.Google Scholar
  76. Williamson, O. (1985) The Economic Institutions of Capitalism, New York: Free Press.Google Scholar
  77. Zamir, S. and Winter, E. (1996) ‘Ultimatum Bargaining in a Changing Environment’, Discussion paper: Hebrew University.Google Scholar

Copyright information

© International Economic Association 2000

Authors and Affiliations

  • Ernst Fehr
    • 1
  • Simon Gächter
    • 1
  1. 1.University of ZurichSwitzerland

Personalised recommendations