Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/104404
Authors: 
König, Clemens
Year of Publication: 
2013
Series/Report no.: 
Munich Discussion Paper 2013-18
Abstract: 
This paper proposes a novel explanation for the context dependency of individual choices in two-player games. Context dependency refers to the well-established phenomenon that a player, when choosing from a given opportunity set created by the other player’s strategy, chooses differently in different situations because of different alternatives to the other player’s strategy. The utility model used to explain this kind of context dependency incorporates a preference for net-loss reciprocation. Net-loss reciprocation means that a player’s willingness to impose a net loss (i.e., loss minus gain) on the other player increases in the net loss that he or she derives from the other player’s strategy. I show that net-loss reciprocation together with the method for calculating net losses developed in this paper explains the context dependencies in individual behaviour that have been documented in a number of experimental studies, whereas existing models of intention-based reciprocity fail to explain all the evidence.
Subjects: 
Reciprocity
Fairness
Experimental economics
Game theory
Loss aversion
JEL: 
C70
C91
D63
D64
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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