Scandinavian Working Papers in Economics

UiS Working Papers in Economics and Finance,
University of Stavanger

No 2014/2: You always meet twice: An experiment on intrinsic versus instrumental reciprocity

Åshild A Johnsen and Ola Kvaløy (ola.kvaloy@uis.no)
Additional contact information
Åshild A Johnsen: UiS, Postal: University of Stavanger, NO-4036 Stavanger, Norway
Ola Kvaløy: UiS, Postal: University of Stavanger, NO-4036 Stavanger, Norway

Abstract: In repeated games, it is hard to distinguish true prosocial behavior from strategic instrumental behavior. In particular, a player does not know whether a reciprocal action is intrinsically or instrumentally motivated. In this paper, we experimentally investigate the relationship between intrinsic and instrumental reciprocity by running a two-period repeated trust game. In the `strategic treatment' the subjects know that they will meet twice, while in the `non-strategic treatment' they do not know and hence the second period comes as a surprise. We find that subjects anticipate instrumental reciprocity, and that intrinsic reciprocity is rewarded. In fact, the total level of cooperation, in which trust is reciprocated, is higher in the non-strategic treatment. Instrumental reciprocity thus seems to crowd out intrinsic reciprocity: If one takes the repeated game incentives out of the repeated game

Keywords: Trust; Reciprocity; Repeated Games; Experiment

JEL-codes: C72; C91; D03

32 pages, January 28, 2014

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