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Cited by 11,264Experimental Behavioral Economics StudiesGame Theory and Voting SystemsEvolutionary Game Theory and Cooperation

A Theory of Fairness, Competition, and Cooperation

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Fehr, E., Schmidt, K. M.·1999·The Quarterly Journal of Economics
DOI 10.1162/003355399556151
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Abstract

There is strong evidence that people exploit their bargaining power in competitive markets but not in bilateral bargaining situations. There is also strong evidence that people exploit free-riding opportunities in voluntary cooperation games. Yet, when they are given the opportunity to punish free riders, stable cooperation is maintained, although punishment is costly for those who punish. This paper asks whether there is a simple common principle that can explain this puzzling evidence. We show that if some people care about equity the puzzles can be resolved. It turns out that the economic environment determines whether the fair types or the selfish types dominate equilibrium behavior.

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Crossref · 10.1162/003355399556151

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77 of 77 references verified0 citation errors · 0 not checkable

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  • People are concerned with increasing social welfare.

    “would be consistent with evidence and theorizing that people are concerned with increasing social welfare (Charness and Rabin 2002;Fehr and Schmidt 1999).”

    From Do Investors Value Sustainability? A Natural Experiment Examining Ranking and Fund Flows (2019) · cites this paper as Fehr and Schmidt 1999

  • Other-regarding behaviors and motives depend on the initial payoff allocation between the subject and the subject's partner.

    “Research on human social preferences provides behavioral (Bolton and Ockenfels, 2000;Charness and Rabin, 2002;Fehr and Schmidt, 1999) and neural (Tricomi et al., 2010) evidence that other-regarding behaviors and motives depend on the initial payoff allocation between the subject and the subject's partner.”

    From Linking Brain Structure and Activation in Temporoparietal Junction to Explain the Neurobiology of Human Altruism (2012) · cites this paper as Fehr and Schmidt, 1999

  • The inclination to altruistically punish uncooperative behavior with no egoistic material benefits is a crucial factor for the sustainability of cooperation.

    “since it has been shown that the inclination to altruistically punish uncooperative behavior with no egoistic material benefits is a crucial factor for the sustainability of cooperation (Fehr and Schmidt, 1999; Fehr and Gächter, 2002; Fehr and Fischbacher, 2004).”

    From Oxytocin promotes altruistic punishment (2017) · cites this paper as Fehr and Schmidt, 1999

  • Participants treated with OT show a higher inclination to deter uncooperative behavior, which transforms the cooperation incentives from a classical prisoner's dilemma into a coordination game.

    “We therefore conclude that participants treated with OT show a higher inclination to deter uncooperative behavior, which transforms the cooperation incentives from a classical prisoner’s dilemma into a coordination game (Fehr and Schmidt, 1999; Fehr and Gächter, 2000, 2002; Fehr and Fischbacher, 2004).”

    From Oxytocin promotes altruistic punishment (2017) · cites this paper as Fehr and Schmidt, 1999

  • Theories of social preferences suggest that people value the gains of others positively if they are perceived to behave fairly, but value others' gains negatively if they behave unfairly.

    “These theories4,7 suggest that people value the gains of others positively if they are perceived to behave fairly, but value others' gains negatively if they behave unfairly.”

    From Empathic neural responses are modulated by the perceived fairness of others (2006) · cites this paper as [7]

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Authors
Fehr, E., & Schmidt, K. M.
Affiliations
  • University of Zurich (CH)
  • Ludwig-Maximilians-Universität München (DE)
ORCID
Venue
The Quarterly Journal of Economics
Publisher
Oxford University Press (OUP)
Published
1999-08-01
Volume
114
Issue
3
Pages
817-868
ISSN
  • 0033-5533 (ISSN-L)
  • 1531-4650
DOI
10.1162/003355399556151
OpenAlex
W3022808291
Cited by
11,264
References
77
Citations by year
2026: 384 · 2025: 565 · 2024: 457 · 2023: 431 · 2022: 477 · 2021: 610 · 2020: 569 · 2019: 586 · 2018: 549 · 2017: 485 · 2016: 495 · 2015: 558 · 2014: 537 · 2013: 583 · 2012: 585
FWCI
445.30
Type
journal article
Language
en
Open access
Locations
  • The Quarterly Journal of Economics (publishedVersion)
  • RePEc: Research Papers in Economics (submittedVersion)
  • HighWire Press Open Archive (submittedVersion)
  • Zurich Open Repository and Archive (University of Zurich) (submittedVersion, other-oa)
Funders
  • National Science Foundation
  • John D. and Catherine T. MacArthur Foundation
  • Massachusetts Institute of Technology
  • Schweizerischer Nationalfonds zur Förderung der Wissenschaftlichen Forschung (119614)
Topics
  • Social Sciences › Safety Research › Experimental Behavioral Economics Studies
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Game Theory and Voting Systems
  • Social Sciences › Sociology and Political Science › Evolutionary Game Theory and Cooperation
Keywords
fairness, equity, competition, cooperation, free-riding, punishment, bargaining power, voluntary cooperation, equilibrium selection, costly punishment

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