Assurance Problem in Gift Exchange Game: An Experimental Study

The workers’ reciprocity in a simple Gift Exchange Game has been demonstrated in prior research to be enforcement problem. We showed that potential future interactions could not motivate the workers significantly because of assurance problem. Lack of information about employers’ reciprocal type made workers reluctant to cooperate. We conducted three experimental treatments to investigate the effort patterns. We found that workers’ efforts were not significantly different between with and without repetition effect. Workers did not cooperate much even when there was enforcement. The assurance problem was overcome when workers could judge the reciprocal type of the employer by comparing current wage with market wage. We found that workers responded more to market wage than current wage and were significantly more cooperative.