Generalized Reciprocity : Theory and Experiment

Those who receive help may be more likely to help a third party. This pay-it-forward behavior, called generalized reciprocity, can be powerful in spreading kindness from person to person. We use laboratory games to explore the psychological motivations that contribute to generalized reciprocity. We rationalize our experimental results using a psychological game-theoretic framework that incorporates and extends Dufwenberg and Kirchsteiger (2004), Battigalli and Dufwenberg (2009), and Fehr and Schmidt (1999). We find that altruism, reciprocity incentives, and inequity aversion are all necessary to explain subjects' behaviors in generalized reciprocal exchange