Toward an understanding of the relative strengths of positive and negative reciprocity
A stylized fact is that agents respond more acutely to negative than positive stimuli. Such findings have generated insights on mechanism-design, have been featured prominently in policymaking, and more generally have led to discussions of whether preferences are defined over consumption levels or changes in consumption. This study reconsiders this stylized fact. In doing so, it provides insights into an important domain wherein positive stimuli induce a greater response than negative stimuli: a principal-agent game with reputational considerations and with the agent on the market's short end. This common setting represents an important feature of labor markets with involuntary unemployment.
We wish to thank Ali Hortacsu and an anonymous referee for helpful comments, Jonathan Alevy for programming help and Nicholas Curott for excellent research assistance. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Judgment and Decision Making, Vol. 5, No. 7, December 2010, pp. 524–539 citation courtesy of