Classical and belief-based gift exchange models: Theory and evidenceSanjit Dhami, Mengxing Wei and Ali al-Nowaihi Games and Economic Behavior, 2023, vol. 138, issue C, 171-196 Abstract: We derive and test the predictions of three competing models of gift exchange: Classical (CGE); Augmented (AGE) based on unexpected wage surprises; and Belief-based (BGE) that uses belief hierarchies to formally model reciprocity and guilt-aversion. Following Akerlof (1982), we also introduce signals of the typical wage, θw, and effort level, θe, in similar firms. We examine the worker's optimal effort in response to exogenous variation in the wage, w, the signals θw, θe, and a signal of the firm's expectations of effort from the worker, s. All three models predict gift exchange, however, the predictions of the AGE and the CGE models with respect to θw, θe, and s, are rejected. The BGE model successfully explains the data in all these respects. Gift exchange is underpinned by guilt-aversion. We also provide novel empirical evidence of first order stochastic dominance of first and second order beliefs. Keywords: Gift exchange; Reciprocity; Guilt-aversion; Psychological game theory; Belief-based models; Industry wage and effort norms (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:138:y:2023:i:c:p:171-196 DOI: 10.1016/j.geb.2022.12.008 Access Statistics for this article Games and Economic Behavior is currently edited by E. Kalai More articles in Games and Economic Behavior from Elsevier |
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