This paper surveys the evolutionary game theoretic literature on reciprocity in human interactions, dealing both with long-term relationships and with sporadic interactions. Four basic themes, repetition, commitment, assortation, and parochialism, appear repeatedly throughout the literature. Repetition can give rise to the evolution of behavior that exhibits reciprocity-like features but a vast array of other behaviors are also stable. In sporadic interactions, reciprocity can be stable if the propensity to punish selfish actions can induce opportunists to cooperate, if reciprocators themselves behave opportunistically when they expect others to do so, or if matching is sufficiently assortative.

: In this paper we report experimental results that relate to the reciprocity experiment of Berg, Dickhaut, and McCabe (1995). We consider direct reciprocity, which means to respond in kind to another person, and indirect reciprocity, understood as rewarding someone else. Another variation concerns the information about the multiplier of donations where we compare the benchmark case with a commonly known multiplier to a condition where the multiplier is known with certainty only to donors. Questions which we try to answer are: Will indirect reciprocity induce higher or lower donations?, will donors with the high multiplier "hide behind the small one?", how do receivers respond to different situations? JEL codes: C72, C92 Key words: Trust, reciprocity, experiment, game * This paper was conceived while we were all at or visiting the CentER for Economic Research at Tilburg University. We thank Harmut Kliemt for his encouraging and inspiring comments. Martin Dufwenberg and Eric van Dam...

Abstract: Two major methods of explaining economic institutions, namely by strategic choices or through (indirect) evolution, are compared for the case of a homogenous quadratic duopoly market. Sellers either can provide incentives for agents to care for sales, or evolve as sellers who care for sales in addition to profits. The two approaches are conceptually quite different, yet similar in the sense that both allow certain kinds of commitment. We show that when the two models are set up in intuitively comparable ways strategic delegation does not change the market results as compared to the usual duopoly solution, while indirect evolution causes a more competitive behavior. Thus the case at hand underscores the differences between the two approaches in explaining economic institutions. JEL codes: C72, D21, D43

Can a court system conceivably control opportunistic behavior if judges are selected from the same population as ordinary citizens and thus are no better than "the rest of us"? This paper provides a new and, as we claim, quite profound "rational choice" answer to that unsolved riddle. Adopting an indirect evolutionary approach with endogenous preference formation the complex interactions between "moral" intrinsic motivation to behave non-opportunistically and extrinsic "formal" controls of opportunism are analysed. Under the assumption that judges are no better than ordinary citizens it is shown that introducing a court system can nevertheless prevent that the more trustworthy are driven out. It cannot be excluded, though, that courts may themselves crowd out trustworthiness under certain circumstances. Key words: Evolutionary game theory. Intrinsic motivation. Trust relationships. Court system. Legal litigation. Hobbesian problem of social order. JEL Classification: A11, A13, C72, D74...

: The two major methods of explaining economic institutions, namely by strategic choices or by (indirect) evolution, are compared for the case of a homogenous quadratic duopoly market. Sellers either can provide incentives for their agents to care for sales (amounts) or evolve as sellers who care for sales in addition to profits. Whereas strategic delegation does not change the market results as compared to the usual duopoly solution, indirect evolution causes a more competitive behavior. Thus the case at hand suffices to demonstrate the difference between the two approaches in explaining economic institutions. (JEL codes: C72, D21, D43) * MD: CentER for Economic Research, Tilburg University, The Netherlands, and Department of Economics, Uppsala University, Sweden. WG: Department of Economics, Humboldt University Berlin, Germany. The paper was written while WG was visiting CentER. We thank Edward Droste and Manfred Königstein for helpful comments. MD thanks the European Union's HCM-Ne...

This paper develops and simulates a model of the co-evolution of self-enforcing reciprocity norms and the demand for children in a developing economy. Children are viewed by agents in this economy as “investment goods, ” which yield an income stream when o¤spring are children and adults. In order to induce children to return the parental investment in their human capital, parents try to instill preferences for reciprocity in their children. These investments in “ethical education ” by parents create a nucleus of reciprocator types in the community, which in turn induces the remaining opportunistic types to behave as if they were reciprocators, in order to …nd partners in their market transactions. The model predicts the emergence of self-enforcing norms of reciprocity with economic development, as well as the decay of these norms with increasing geographical mobility of the population, and a resulting decline in the demand for children.

If one abstracts from specially organized markets like stock or commodity exchanges, (international) trade relies on bargaining between the interested parties. Whereas earlier the results of bargaining were seen as unpredictable or determined by an at most vaguely defined concept of (relative) bargaining power, it is simply a field of application in view of game theory. Our discussion tries to elaborate the specific institutional aspects of international bargaining with interacting parties from different countries. Especially, we concentrate on the problem when contracts resulting from international bargaining are unenforceable.

Rational bargaining behavior depends crucially on the rules of bargaining, especially on whether parties decide sequentially or independently. Whereas in ultimatum bargaining the proposer can exploit the responder, independent commitments result in more balanced payoffs. To limit the scope of possible bargaining results we try to rule out certain bargaining rules. In our indirect evolutionary analysis we first determine the solution for all possible rule constellations and then derive the evolutionary stable rules of bargaining. It is shown that ultimatum bargaining requires considerable, but non-maximal uncertainty about the size of the pie, i.e. the monetary amount to be distributed.

The evolution of trustworthiness as a major aspect of business ethics depends crucially on whether it can be signaled. If this is impossible, only opportunistic traders will survive. Whereas previous studies have analysed detection agencies (Güth and Kliemt, 1994 and 1998) or have substituted signaling by ex post-punishment, e.g. in the form of courts (Brennan, Güth, Kliemt, 1997a and b), we here introduce the institution of banks which can guarantee payment. It is shown that this can crowd in trustworthiness, i.e. trustworthy traders can survive in the evolutionary race. Compared to detection agencies the result may, however, be both, crowding out and crowding in of business ethics. The crucial feature is the bank's ability to discriminate between trustworthy and unreliable debtors which, in our model, is formally captured by the probability dioeerence of accepting their respective credit applications.

The basic idea of decision emergence is to generate the prefered decision alternative instead of assuming it as exogeneously given like in neo-classical economics and game theory. The particular problem of ultimatum proposals has been selected in order to rely on experimental observations when speculating how choices emerge. Our approach distinguishes primary and secondary concerns of ultimatum proposers and illustrates how qualitative learning can (re)shape preferences over choices.