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Tit for Tat: Foundations of Preferences for Reciprocity in Strategic Settings

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Author Info
Uzi Segal (The University of Western Ontario Department of Economics)
Joel Sobel

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Abstract

This paper assumes that in addition to the conventional (selfish) preferences over outcomes, players in a strategic environment have preferences over strategies. In the context of two-player games, it provides conditions under which a player's preferences over strategies can be represented as a weighted average of the individual's selfish payoffs and the selfish payoffs of the opponent. The weight one player places on the opponent's selfish utility depends on the opponent's behavior. In this way, the framework is rich enough to describe the behavior of individuals who repay kindness with kindness and meanness with meanness. The paper assumes that each player has an ordering over his opponent's strategies that describes the niceness of these strategies. It introduces a condition that insures that the weight on opponent's utility increases if and only if the opponent chooses a nicer strategy.

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Paper provided by University of Western Ontario, Department of Economics in its series UWO Department of Economics Working Papers with number 9905.

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Date of creation: Jun 1999
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Handle: RePEc:uwo:uwowop:9905

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Postal: Department of Economics, Reference Centre, Social Science Centre, University of Western Ontario, London, Ontario, Canada N6A 5C2
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  17. Abbink, Klaus & Gary Bolton & Abdolkarim Sadrieh & Fang-Fang Tang, 1996. "Adaptive Learning versus Punishment in Ultimatum Bargaining," Discussion Paper Serie B 381, University of Bonn, Germany.
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  18. Prasnikar, Vesna & Roth, Alvin E, 1992. "Considerations of Fairness and Strategy: Experimental Data from Sequential Games," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 865-88, August. [Downloadable!] (restricted)
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  33. Andreoni, James, 1995. "Cooperation in Public-Goods Experiments: Kindness or Confusion?," American Economic Review, American Economic Association, vol. 85(4), pages 891-904, September. [Downloadable!] (restricted)
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