Working Papers in Economics,
University of Gothenburg, Department of Economics

Abstract: I show that a simple formal model of reciprocal altruism is able to predict human behavior in contracting situations, puzzling when considered within selfishness assumption. For instance, motivation and performance crowding-out are explained by a signaling mechanism in which provision of an extrinsic incentive signals non-generosity of the Principal and decreases Agent’s intrinsic motivation. The model’s equilibrium predicts behavior in the Control Game of Falk and Kosfeld and in a variant of Trust Game by Fehr and Rockenbach. This suggests that reciprocal altruism modeling could be fruitful more generally in applications of contract theory.

Keywords: Reciprocal Altruism; Extrinsic and intrinsic motivation; Contract Theory; Behavioral Economics.

JEL-codes: D82; M54

39 pages, December 9, 2009

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