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Explaining gift exchange – The limits of good intentions


Netzer, Nick; Schmutzler, Armin (2014). Explaining gift exchange – The limits of good intentions. Journal of the European Economic Association, 12(6):1586-1616.

Abstract

This paper explores the limitations of intention-based social preferences as an explanation of gift-exchange between a firm and a worker. In a framework with one self-interested and one reciprocal player, gift-giving never arises in equilibrium. Instead, any equilibrium in a large class of multistage games must involve mutually unkind behavior of both players. Besides gift-exchange, this class of games also includes moral hazard models and the rotten kid framework. Even though equilibrium behavior may appear positively reciprocal in some of these games, the self-interested player never benefits from reciprocity. We discuss the relation of these results to the theoretical and empirical literature on gift-exchange in employment relations.

Abstract

This paper explores the limitations of intention-based social preferences as an explanation of gift-exchange between a firm and a worker. In a framework with one self-interested and one reciprocal player, gift-giving never arises in equilibrium. Instead, any equilibrium in a large class of multistage games must involve mutually unkind behavior of both players. Besides gift-exchange, this class of games also includes moral hazard models and the rotten kid framework. Even though equilibrium behavior may appear positively reciprocal in some of these games, the self-interested player never benefits from reciprocity. We discuss the relation of these results to the theoretical and empirical literature on gift-exchange in employment relations.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Language:English
Date:December 2014
Deposited On:12 Dec 2014 07:44
Last Modified:08 Dec 2017 07:31
Publisher:Wiley-Blackwell Publishing, Inc.
ISSN:1542-4766
Additional Information:The definitive version is available at www3.interscience.wiley.com
Publisher DOI:https://doi.org/10.1111/jeea.12086

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