Trust, Reciprocity, and Favors in Cooperative Relationships

Journal Article

We study trust, reciprocity, and favors in a repeated trust game with private information. In our main analysis, players are willing to exhibit trust and thereby facilitate cooperative gains only if such behavior is regarded as a favor that must be reciprocated, either immediately or in the future. The size of a favor owed may decline over time, following neutral periods. Indeed, a favor-exchange relationship with this feature improves on a simple favor-exchange relationship. In some settings, an infrequent and symmetric punishment sustains greater cooperation. A honeymoon period followed by favor-exchange or symmetric punishment can also offer scope for improvement. (JEL C73, D82, Z13)

Duke Authors

Cited Authors

  • Abdulkadiroglu, A; Bagwell, K

Published Date

  • May 2013

Published In

  • American Economic Journal: Microeconomics

Volume / Issue

  • 5 / 2