ON THE NATURE OF RECIPROCAL MOTIVES

I. INTRODUCTION The most widely applied models in economics and game theory are based on the assumption of "self-regarding preferences," which are characterized by an exclusive concern about one's own material payoff. Models of self-regarding preferences capture behavior quite well in many contexts, including double auctions as in Smith (1982) and Davis and Holt (1993), one-sided auctions with independent private values as in Cox and Oaxaca (1996), procurement contracting as in Cox et al. (1996), and search as in Cox and Oaxaca (1989, 2000), Harrison and Morgan (1990), and Cason and Friedman (2003). But there is now a large body of literature that reports systematic inconsistencies with the implications of the self-regarding preferences model. (1) These replicable patterns of behavior are observed in experimental games involving decisions about the division of material payoffs among the participants. One explanation for the observed behavior that has received considerable attention is reciprocity. We report experiments designed to yield insight into the nature and robustness of reciprocal motives. By observing decisions in a group of related experiments we are able to discriminate between behavior motivated by reciprocity and behavior motivated by nonreciprocal other-regarding preferences over outcomes. Some treatments introduce the possibility of behavior motivated by positive reciprocity, whereas other treatments introduce the possibility of negatively reciprocal motivation. By "positive reciprocity" we mean a motivation to adopt a generous action that benefits someone else because that person's intentional behavior was perceived to be beneficial to oneself within the decision context of the experiment. Similarly, by "negative reciprocity" we mean a motivation to adopt a costly action that harms someone else because that person's intentional behavior was perceived to be harmful to oneself within the decision context of the experiment. Perhaps the most familiar experiment in the reciprocity literature is the ultimatum game. In this game, the first mover proposes a division of a fixed sum of money and the second mover either accepts this proposal or vetoes it. In the event of a veto, both players get a money payoff of zero. The self-regarding preferences model predicts extremely unequal payoffs for this game, with the first mover offering the second mover the smallest feasible positive amount of money and the second mover accepting this offer. However, observed behavior in the ultimatum game contrasts sharply with these predictions. Under a wide variety of conditions, first movers in ultimatum games tend to propose relatively equal splits. This has been observed by Guth et al. (1982), Hoffman and Spitzer (1985), Hoffman et al. (1994), and Bornstein and Yaniv (1998). (2) First movers may make generous proposals in ultimatum games because they have inequality-averse other-regarding preferences, as suggested by Fehr and Schmidt (1999) and Bolton and Ockenfels (2000), or altruistic other-regarding preferences, as suggested by Cox and Sadiraj (2005). Alternatively, first movers may make generous proposals because they are afraid that second movers will veto lopsided proposals. Second movers may veto such proposals because of inequality-averse preferences over outcomes or because of negative reciprocity. The implications for modeling behavior are different if the behavior is motivated by preferences over outcomes that are unconditional on perceived intentions than if it is motivated by negative reciprocity or fear of negative reciprocity. To discriminate among alternative motivations, we use a triadic experimental design that includes a mini-ultimatum game, which we call the Punishment mini-ultimatum game (Punishment-MUG), and two dictator control treatments. (3) Additional insight into the nature of alternative motives is gained from a systematic comparison of our data with data from the different experimental design of Falk et al. …