The roots of reciprocity

In many cultures and industries gift giving is a common practice to influence behavior, often at the expense of a third party. Examples include business gifts given by suppliers to procurement managers, by pharmaceutical companies to physicians or by lobbyists to politicians.

In an experimental study we isolate the reciprocal effect of small gifts that are given unconditionally in one-shot interactions and have no informational content. We show that gift giving strongly affects the recipient’s decisions in favor of the gift giver even if this comes at the expense of a third party. Subjects are well aware that the gift is given to influence their behavior but reciprocate nevertheless. We also show that withholding the gift triggers a strong negative response.

The effects of gift giving are mitigated (but do not disappear) if the decision maker takes the decision on his own behalf or if he is offered a financial incentive scheme that aligns his interests with the interests of her client. The experimental results are inconsistent with the most prominent models of social preferences. We propose an extension of existing theories to capture the observed behavior by endogenizing the “reference group” to whom social preferences are applied.

A new paper by Ulrike Malmendier and Klaus Schmidt.

Little discussion of applications to many literatures, including vote-buying. Exciting possibilities for further work in areas relatively unexplored with these experiments.