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Indirect reciprocity and money

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  • Hens, Thorsten
  • Vogt, Bodo

Abstract

Using an experimental analysis of a simple monetary economy as a basis, we argue that a monetary system can be more stable than one would expect from individual rationality. We show that positive reciprocity stabilizes the monetary system, provided every participant considers the feedback of his choice to the stationary equilibrium. If, however, the participants do not play stationary strategies and some participants notoriously refuse to accept money, then due to negative reciprocity their behavior will eventually induce a break-down of the monetary system.

Suggested Citation

  • Hens, Thorsten & Vogt, Bodo, 2010. "Indirect reciprocity and money," Games and Economic Behavior, Elsevier, vol. 70(2), pages 354-374, November.
    • Handle: RePEc:eee:gamebe:v:70:y:2010:i:2:p:354-374
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    References listed on IDEAS

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