Is There Reciprocity in a Reciprocal Exchange Economy? Evidence from a Slum in Nairobi, Kenya

Norms of reciprocity contribute to the enforcement of cooperative agreements in bilateral sequential exchange. This paper examines the norms that apply in a reciprocal-exchange economy and what effect on trust, trustworthiness and efficiency they have. In our one-shot investment game experiments with Nairobi slum dwellers, people generally adhered to the norm of “balanced reciprocity”, which obligates quid-pro-quo returns for any level of trust. This norm differs from “conditional reciprocity,” prevalent in developed countries, according to which higher trust levels are rewarded with proportionally larger returns. Which norms prevail has implications for the gains from trade realized in bilateral exchange.