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ERC: A Theory of Equity, Reciprocity, and Competition

ERC: A Theory of Equity, Reciprocity, and Competition Abstract We demonstrate that a simple model, constructed on the premise that people are motivated by both their pecuniary payoff and their relative payoff standing, organizes a large and seemingly disparate set of laboratory observations as one consistent pattern. The model is incomplete information but nevertheless posed entirely in terms of directly observable variables. The model explains observations from games where equity is thought to be a factor, such as ultimatum and dictator, games where reciprocity is thought to play a role, such as the prisoner's dilemma and gift exchange, and games where competitive behavior is observed, such as Bertrand markets. (JEL C78, C90, D63, D64, H41 ) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Review American Economic Association

ERC: A Theory of Equity, Reciprocity, and Competition

American Economic Review , Volume 91 (1) – Mar 1, 2000

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Publisher
American Economic Association
Copyright
Copyright © 2000 by the American Economic Association
Subject
Articles
ISSN
0002-8282
DOI
10.1257/aer.90.1.166
Publisher site
See Article on Publisher Site

Abstract

Abstract We demonstrate that a simple model, constructed on the premise that people are motivated by both their pecuniary payoff and their relative payoff standing, organizes a large and seemingly disparate set of laboratory observations as one consistent pattern. The model is incomplete information but nevertheless posed entirely in terms of directly observable variables. The model explains observations from games where equity is thought to be a factor, such as ultimatum and dictator, games where reciprocity is thought to play a role, such as the prisoner's dilemma and gift exchange, and games where competitive behavior is observed, such as Bertrand markets. (JEL C78, C90, D63, D64, H41 )

Journal

American Economic ReviewAmerican Economic Association

Published: Mar 1, 2000

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