Economic Theory Seminar - Jingni Yang (ANU)

Title: Giving According To Agreement

Abstract:  We propose an axiom that we call Agreement to deal with changing preferences and derive its empirical implications. The resulting revealed preference condition generalises GARP when preferences are different but one preference relation is still informative about another one. We apply this idea to a social choice experiment, where a player can respond to another player being generous or relatively selfish. We find that people have consistent preferences for each case, but that preferences depend on the selfishness of the other player, and that subjects act in line with Agreement. We thus provide a microeconomic foundation for modelling and interpreting responses to the intentions of other players as a preference for reciprocity.