Intrinsic and Instrumental Reciprocity : An Experimental Study

We experimentally test a repeated veto game: in each of an in…nite number of periods, Nature generates a pair of payo¤s, one for each player. Although the sum of the players’payo¤s is positive, one of the players may receive a negative payo¤. Players simultaneously decide whether to approve such a proposal. If either of the players vetoes the proposal, both players get zero; otherwise, they receive the value generated by Nature. In this context, we devise an experiment to distinguish between alternative explanations of generous behavior (accepting negative payo¤s): altruism and other-regarding preferences, intrinsic backward-looking reciprocity (reciprocal kindness), and instrumental forward-looking (or equilibrium) reciprocity. Our results are broadly consistent with the hypothesis that observed We acknowledge the helpful comments made by Emel Filiz-Ozbay, Guillaume Frechette, Alistair Wilson, Drew Fudenberg, Giancarlo Spagnolo as well as the seminar participants at the CESS Experimental Economics Seminar, the Nordic Behavioral and Experimental Economics Conference, the Mannheim Experimental Economics Conference and the University of Heidelberg, and Drexel University. Research support by the Center for Experimental Social Science is gratefully acknowledged.

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