Social Ties and Coordination on Negative Reciprocity: The Role of Affect

This is an experimental study of a three-player power-to-take game where a proposer is matched with two responders. We compare a treatment in which subjects are anonymous to each other (strangers) with one in which responders know each other from outside the lab (friends). We focus on the responders’ decisions, beliefs, and emotions. We find that friends punish the proposer more than strangers, and that they are more likely to coordinate their punishment (without communication). Both punishment and coordination are explained by the responders’ emotional reactions. Furthermore, the responders’ expectations are better predictors of emotions and destruction than their fairness perceptions. * A previous version of this paper circulated under the title “Reciprocity and emotions when reciprocators know each other”. We are thankful for feedback from participants at the Public Choice Society meeting in Baltimore, the ESA meeting in Amsterdam, and the Tilburg Symposium on Psychology and Economics.