Role of Relative Information and Reciprocity in a Gift Exchange Game: An Experimental Study

Workers' reciprocity in a simple gift exchange game has been demonstrated in prior research to be a problem of enforcement. This paper showed that potential future interactions could not motivate the workers significantly because of assurance problems. Lack of information about employers' relative reciprocal type made workers reluctant to cooperate. Three experimental treatments were conducted to investigate effort patterns. The design was replicated from the paper Kean Siang et al (2010). It was found that workers' efforts, between those with and without repetition effect, were not significantly different. Workers did not cooperate much even when there was enforcement. The low effort problem was overcome when workers were able to judge the relative reciprocal type of the employer by comparing the current wage with the average wage. It was found that workers responded better to average wages than to current wages, and were significantly more cooperative.