We present and test a model of reciprocity in which people are more likely to repay good treatment to the extent they judge it as motivated by true caring rather than tactical self-interest. The model’s key contributions stem from how it handles ambiguously motivated behavior. It allows people to maintain divergent hypotheses: They can view behavior as driven by caring, self-interest, or a mix thereof. In contrast, previous analyses resolve rather than maintain ambiguity. They treat caring and self-interest as mutually exclusive hypotheses, and require that people commit to one and dismiss the other. By more realistically handling ambiguity, our model yields three benefits. First, it accommodates intuitive patterns of play that existing analyses do not and which we experimentally corroborate. These patterns reflect intermediate inclinations to reciprocate ambiguously motivated positive behavior. Second, it challenges conventional interpretations of long-studied phenomena, including unraveling in finitely iterated prisoners’ dilemmas, substantial offers in ultimatum games, and gift exchange. Third, it highlights how diversity in perceptions – the same action can appear generous to one person and miserly to another – is empirically consequential. Under conventional interpretations and without accounting for diverse perceptions, the aforementioned phenomena have been viewed as inconsistent with a taste for repaying good treatment. Our model shows that they are entirely consistent with a nuanced form of this taste: a desire to repay good treatment that seems to largely reflect genuine caring.

The money-burning game (MBG) is widely used to study anti-social or destructive behavior. We extend the design of the MBG to separate three motives that could lead subjects to burn their partner’s money – spite, reciprocity, and inequality aversion. We detect that reciprocity is the dominant reason: Most of our subjects would only burn their partner’s money if they believed that their partner would burn theirs. This finding has important implications for the interpretation of the behavior of the game.

This article examines the feasibility of enforcing Singapore money judgments in Cambodia, focusing on the “guarantee of reciprocity” – an ambiguous yet critical condition. It is ambiguous because Cambodian courts have not yet interpreted it. It is critical because it is perceived as the main obstacle to enforcing foreign judgments. Without a treaty-based mutual enforcement mechanism between Cambodia and Singapore, it is unclear whether a Singapore money judgment could be enforced in Cambodia or if a judgment creditor’s application would be dismissed in any event citing lack of reciprocity. Following an analysis of the laws of Cambodia, Singapore, and Japan, the article concludes that there is no legal obstacle before the Cambodian courts to enforce a Singapore money judgment. The flexible interpretation of the guarantee of reciprocity outlined in this article would enhance access to justice, eliminate a trade barrier, and make the investment environment more attractive in Cambodia.

Using public goods games in a laboratory setting, we study team-level production, where two teams compete for the resources of a common-member who can benefit from and provide effort in both teams. Intrinsically, the common-member faces divided loyalties. We examine such competition in a setting in which the common-member has productive abilities equal to that of the other team members (dedicated-members), and in two settings where he/she has greater relative potential. When effort (contributions) by the common-member have greater productivity (coupled with higher opportunity costs to contribute) in providing the public good relative to that of dedicated-members, we find team performance is not significantly increased. On the other hand, when the common-member has a greater endowment, sufficient to match the absolute contributions of team members in both teams, there is a significant increase in team performance. The evidence suggests that a norm of reciprocity by dedicated-members based on absolute contributions of the common-member better explains behavior than a norm based on the value added of the common-member's contributions. This behavior, along with fairness norms elicited in a survey, suggests that on average dedicated members do not sufficiently incorporate the common-members' higher opportunity costs in the treatment where his/her productivity is increased. This setting provides an important illustration of where the behavioral response to the type of inequality matters, leading to differences in team efficiency.

This paper reports three experiments with triadic or dyadic designs. The experiments include the moonlighting game in which first-mover actions can elicit positively or negatively reciprocal reactions from second movers. First movers can be motivated by trust in positive reciprocity or fear of negative reciprocity, in addition to unconditional other-regarding preferences. Second movers can be motivated by unconditional other-regarding preferences as well as positive or negative reciprocity. The experimental designs include control treatments that discriminate among actions with alternative motivations. Data from our three experiments and a fourth one are used to explore methodological questions, including the effects on behavioral hypothesis tests of within-subjects vs. across-subjects designs, single-blind vs. double-blind payoffs, random vs. dictator first-mover control treatments, and strategy responses vs. sequential play.

We experimentally investigate the relationship between (un)kind actions and subsequent deception in a two-player, two-stage game. The first stage involves a dictator game. In the second-stage, the recipient in the dictator game has the opportunity to lie to her counterpart. We study how the fairness of dictator-game outcomes affects subsequent lying decisions where lying hurts one’s counterpart. In doing so, we examine whether the moral cost of lying varies when retaliating against unkind actions is financially beneficial for the self (selfish lies), as opposed to being costly (spiteful lies). We find evidence that individuals engage in deception to reciprocate unkind behavior: The smaller the payoff received in the first stage, the higher the lying rate. Intention-based reciprocity largely drives behavior, as individuals use deception to punish unkind behavior and truth-telling to reward kind behavior. For selfish lies, individuals have a moral cost of lying. However, for spiteful lies, we find no evidence for such costs. Taken together, our data show a moral cost of lying that is not fixed but instead context-dependent.

We use instrumental variables for estimating the causal effect of beliefs on contributions in repeated public good games. The effect is about half as large as suggested by ordinary least squares. Thus, we present evidence that beliefs have a causal effect on contributions, but also that beliefs are endogenous. We compare the causal, belief-based model of contributions to alternative models based on matching the previous contributions of others and responding to one’s deviation from the average in the previous round. The causal, belief-based model performs well, indicating that beliefs have a central role in determining contributions.

What motivates people to trust and be trustworthy? Is trust solely “calculative,” based on the expectation of trustworthiness, and trustworthiness only reciprocity? Employing a within-subject design, we run investment and dictator game experiments in Russia, South Africa and the United States. Additionally, we measured risk preferences and expectations of return. Expectations of return account for most of the variance in trust, but unconditional kindness also matters. Variance in trustworthiness is mainly accounted for by unconditional kindness, while reciprocity plays a comparatively small role. There exists some heterogeneity in motivation but people behave surprisingly similarly in the three countries studied.

Previous work has shown that unobservable random shocks on output have a detrimental effect on efficiency in short-term (‘static’) employment relationships. Given the prevalence of long-term (‘dynamic’) relationships in firms, we investigate whether the impact of shocks is similarly pronounced in gift-exchange relationships where the same principal-agent pair interacts repeatedly. In dynamic relationships, shocks have a significantly less pronounced negative effect on efficiency than in static relationships. In an attempt to identify the drivers for our results we find that the combination of a repeated-game effect (current misbehavior can be punished in future periods) and a noise-canceling effect (part of the noise cancels out in the long run) is required to avoid the detrimental effects of unobservable random shocks on efficiency.

Both the law and culture distinguish between acts of commission that overturn the status quo and acts of omission that uphold it. This distinction is of central importance when it comes to reciprocal actions. A stylized fact of everyday life is that acts of commission elicit stronger reciprocal responses than do acts of omission. We report experiments that directly test whether this stylized fact characterizes behavior in controlled experiments. We compare reciprocal responses to both types of acts in experiments using binary, extensive form games. Across three experiments, we examine the robustness of our results to different ways in which the status quo can be induced in experiments. The data show a clear difference between effects of acts of commission and omission by first movers on reciprocal responses by second movers.

Lying to participants offers an experimenter the enticing prospect of making “others’ behaviour” a controlled variable, but is eschewed by experimental economists because it may pollute the pool of subjects. This paper proposes and implements a new experimental design, the Conditional Information Lottery, which offers all the benefits of deception without actually deceiving anyone. The design should be suitable for most economics experiments, and works by a modification of an already standard device, the Random Lottery incentive system. The deceptive scenarios of designs which use deceit are replaced with fictitious scenarios, each of which, from a subject's viewpoint, has a chance of being true. The design is implemented in a sequential play public good experiment prompted by Weimann's (1994) result, from a deceptive design, that subjects are more sensitive to freeriding than cooperation on the part of others. The experiment provides similar results to Weimann's, in that subjects are at least as cooperative when uninformed about others’ behaviour as they are if reacting to high contributions. No deception is used and the data cohere well both internally and with other public goods experiments. In addition, simultaneous play is found to be more efficient than sequential play, and subjects contribute less at the end of a sequence than at the start. The results suggest pronounced elements of overconfidence, egoism and (biased) reciprocity in behaviour, which may explain decay in contributions in repeated play designs. The experiment shows there is a workable alternative to deception.

A reciprocal action is an action meant to have a similar influence on another's payoff as another's action has on one's own. One hypothesis asserts that reciprocal action is triggered by the reciprocator's belief that another's action was good or ill intended. The other hypothesis says that the reciprocator is simply acting to implement fixed preferences over payoff allocations. We report on an experiment that allows us to study both positive (reward) and negative (punishment) reciprocal action in a single framework. Knowing the preferences for payoff allocations is sufficient to account for nearly all the reciprocal action we observe in our experiment.

This paper studies how subjects in a three-person sequential step-level public good game learn to punish free riders more over time. Our current work makes several additions to the literature on other regarding behavior. First, our experiment provides evidence that subjects care about the actions that lead to an outcome as well as the outcome itself, replicating the results of A. Falk, E. Fehr and U. Fischbacher (Economic Inquiry, in press), J. Brandts and C. Sola (Games and Economic Behavior, 36(2), 138-157, 2001.) and J.H. Kagel and K. Wolfe (Working paper, Ohio State University, 1999). Second, our experiment provides one of the first tests of the newer theories of reciprocity by A. Falk and U. Fischbacher (Working paper, University of Zurich, 2000) and G. Charness and M. Rabin (Quarterly Journal of Economics, in press) that take a psychological games approach. We find that these theories fail to explain the experimental data. Finally, we examine the mechanism by which subjects learn to punish free-riding more ofter over time.

We investigate the role of intentions in two-player two-stage games. For this purpose we systematically vary the set of opportunity sets the first mover can choose from and study how the second mover reacts not only to opportunities of gains but also of losses created by the choice of the first mover. We find that the possibility of gains for the second mover (generosity) and the risk of losses for the first mover (vulnerability) are important drivers for second mover behavior. On the other hand, efficiency concerns and an aversion against violating trust seem to be far less important motivations. We also find that second movers compare the actual choice of the first mover and the alternative choices that would have been available to him to allocations that involve equal material payoffs.

We study behavior within a simple principal-agent experiment. Our design allows for a large class of linear contracts. Principals can offer any feasible combination of (negative) fixed wages and incentives in the form of return sharing. This great contractual flexibility allows us to study incentive compatibility simultaneously with issues of ‘fair sharing’ and reciprocity, which were previously found to be important. We find a high degree of incentive-compatible behavior, but also ‘fair sharing’ and reciprocity. In contrast to other incentive devices studied in the literature, the incentives are ‘reciprocity-compatible’. Principals recognize the agency problem and react accordingly.

This study examines whether reciprocity is affected by what others know and do. Two types of social effects are investigated within the framework of a modified investment game. On the one hand, we assess the role played by the awareness that own choices are observed by another trustee—i.e., peer pressure. On the other hand, we measure the interaction between trustees’ choices—i.e., social spillovers. We find that peer pressure fosters reciprocity and, to a lesser extent, so do social spillovers.