Department of Economics

Papers such as Akerlof and Yellen (1990) and Rabin (1993) argue that considerations such as fairness and reciprocity are important in individual decision-making. The gift-exchange game (Fehr, Kirchsteiger & Reidl, 1993, and many others) has established that, in the laboratory, higher wages offered by an employer lead to considerably more costly effort provision. However, it is unclear whether this behavior reflects reciprocity or other forms of social preferences. This paper tests whether attribution of volition in choosing a wage has a significant effect on subsequent costly effort provision. Treatments varied whether wages were chosen by the employer or by an external process. We see that both distributional concerns and reciprocity play a major role. The data are examined in the light of recent utility models.