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Workshop One, Session Two

Modelling Reciprocity Concerns in Economic Decisions

Presenter: Stephane Mahuteau


"Reciprocity, altruism, comparisons of relative payoffs, envy, revenge, or, more generally, others-regarding preferences (or fairness) significantly affect individuals’ choices, including in Economic decisions. They play a large part in the outcomes of trade negotiations, bargaining, employment or subcontracting, etc. Yet, up to recently, models ignored these aspects of decision making in Game Theory and Economic analysis in general. In this seminar we show experimental evidence of these others-regarding preferences exhibited by individuals. After precising their nature we then turn to show how they affect the outcomes of a number of strategic interactions. We highlight the importance of reciprocity in a particular type of interaction: The employment relationship. We then survey the Game theory literature to see how such motivations can be incorporated directly into Economic models and finally propose our own framework. Further evidence of the importance of reciprocity in employment relations is given through econometric results on a survey of French firms."