American Economic Review Vol. 90 No. 1 2000

ERC: A Theory of Equity, Reciprocity, and Competition

Gary E. Bolton¹; Axel Ockenfels²

¹ Smeal College of Business, 310 Beam, Pennsylvania State University, University Park, PA 16802. · ² Faculty of Economics and Management, University of Magdeburg, P.O. Box 4120, D-39016 Magdeburg, Germany.

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.

DOI

10.1257/aer.90.1.166

Volume

90

Issue

1

Pages

166-193

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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