Reciprocal Exchange: A Self-Sustaining System

Journal Article (Journal Article)

Reciprocal exchange, or gift exchange, remains a widespread means of obtaining goods and services. This paper examines the persistence of reciprocal exchange by formalizing the interaction between self-enforcing exchange agreements and monetary market exchange. When more people engage in reciprocal exchange, market search costs increase, reciprocity is easier to enforce and yields higher utility. Thus, personalized exchange can persist even when it is inefficient. Conversely, large markets can destroy reciprocity when reciprocal exchange is efficient. The results characterize the use of personal "connections" as a system of reciprocal exchange and explain the disappearance of reciprocity when tribes encounter markets.

Full Text

Duke Authors

Cited Authors

  • Kranton, RE

Published Date

  • September 1, 1996

Published In

Volume / Issue

  • 86 / 4

Start / End Page

  • 830 - 851

International Standard Serial Number (ISSN)

  • 0002-8282

Citation Source

  • Scopus