When Social Norms Overpower Competition: Gift Exchange in Experimental Labor Markets

Do competitive markets remove the effect of social norms on market outcomes? Or are norms capable of exerting a persistent influence? In this article we report the results of a series of competitive market and bilateral bargaining experiments. They indicate that the norm of reciprocity gives rise to...

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Bibliographic Details
Published in:Journal of labor economics 1998-04, Vol.16 (2), p.324-351
Main Authors: Fehr, Ernst, Kirchler, Erich, Weichbold, Andreas, Gächter, Simon
Format: Article
Language:English
Subjects:
Altruism
Bargaining
Collective bargaining
Competition
Economic models
Economic rent
Economic theory
Employment contracts
Excess supply
Exchange
Fairness
Gift
Gifts
Labor
Labor economics
Labor markets
Labour economics
Labour market
Military pay
Reciprocity
Ritual exchange
Social conditions & trends
Social norms
Studies
Wage differential
Wages
Workers
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Summary:Do competitive markets remove the effect of social norms on market outcomes? Or are norms capable of exerting a persistent influence? In this article we report the results of a series of competitive market and bilateral bargaining experiments. They indicate that the norm of reciprocity gives rise to wages that are persistently above the competitive level. Moreover, wages under bilateral bargaining conditions coincide with wages in competitive markets, indicating that competition has a limited effect when the norm of reciprocity is operative. In addition, the results show that workers' reciprocal behavior increases effort and, hence, the efficiency of trades.
ISSN:0734-306X
1537-5307
DOI:10.1086/209891