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A Theory of Fairness, Competition, and Cooperation*

A Theory of Fairness, Competition, and Cooperation* There is strong evidence that people exploit their bargaining power in competitive markets but not in bilateral bargaining situations. There is also strong evidence that people exploit free-riding opportunities in voluntary cooperation games. Yet, when they are given the opportunity to punish free riders, stable cooperation is maintained, although punishment is costly for those who punish. This paper asks whether there is a simple common principle that can explain this puzzling evidence. We show that if some people care about equity the puzzles can be resolved. It turns out that the economic environment determines whether the fair types or the selfish types dominate equilibrium behavior. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Quarterly Journal of Economics Oxford University Press

A Theory of Fairness, Competition, and Cooperation*

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Publisher
Oxford University Press
Copyright
© Published by Oxford University Press.
ISSN
0033-5533
eISSN
1531-4650
DOI
10.1162/003355399556151
Publisher site
See Article on Publisher Site

Abstract

There is strong evidence that people exploit their bargaining power in competitive markets but not in bilateral bargaining situations. There is also strong evidence that people exploit free-riding opportunities in voluntary cooperation games. Yet, when they are given the opportunity to punish free riders, stable cooperation is maintained, although punishment is costly for those who punish. This paper asks whether there is a simple common principle that can explain this puzzling evidence. We show that if some people care about equity the puzzles can be resolved. It turns out that the economic environment determines whether the fair types or the selfish types dominate equilibrium behavior.

Journal

The Quarterly Journal of EconomicsOxford University Press

Published: Aug 1, 1999

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