1. Avner Shaked Brief Reply
[Fairness and Reciprocity Special Issue Begins in Previous Volume] Shaked's brief reply takes a less pejorative tone and boils the debate down to one serious concern. When a researcher selects parameter values for a theoretical model consistent with data from already existing experiments, to what extent has it been shown that the model "explains" the data? Reviewed by Jeff Ely and David K. Levine
2. Ernst Fehr, Alexander Klein and Klaus M. Schmidt Contracts, Fairness and Incentives
[Fairness and Reciprocity Special Issue] This is a very recent application of the Fehr-Schmidt methodology. Experimentally and theoretically it is shown that it is better not to rely soley on either trust or incentives when desiging contracts; bonus contracts that combine elements of incentives and trust do the best. Reviewed by Jeff Ely, Drew Fudenberg and David K. Levine.
3. Faruk Gul and Wolfgang Pesendorfer The Canonical Type Space for Interdependent Preferences
[Fairness and Reciprocity Special Issue] An alternative to theories of "fairness" that seem to have a degree of arbitrariness as to what is "fair" are theories of reciprocity in which people want to be kind or cruel based upon their perception of whether their opponent(s) are kind or cruel. Gul-Pesendorfer provide an axiomatic basis for interpersonal utility that leads to a theory of reciprocity. As an application they show how their model is consistent with data on the ultimatum game and related experiments. Reviewed by Jeff Ely, Drew Fudenberg, and David K. Levine.
4. James Andreoni, Marco Castillo and Ragan Petrie Revealing Preferences for Fairness in Ultimatum Bargaining
[Fairness and Reciprocity Special Issue]Part of the controversy over the Fehr/Schmidt (and other) calibrations revolves around the fact that existing ultimatum experiments do not generate enough information to pin down preferences. The correct response to this criticism is to get better data. This study does exactly that by allowing the responder to shrink offers as well as to accept and reject them. The underlying preferences appear to satisfy ordinary convexity and regularity assumptions, but are non-monotonic and fairly heterogeneous across individuals. Reviewed by Jeff Ely, Drew Fudenberg, and David K. Levine
5. Navin Kartik Information Transmission with Cheap and Almost-Cheap Talk
Consider a signaling model with many equilibria, some of which are more informative than others. Suppose that truth is free, but lies are costly. Then significant information can be transmitted by talk. So some of the less informative equilibria disappear. Which equilibria remain in the limiting case as the cost of lying approaches zero? The paper shows that under "a standard condition", only the most informative equilibrium of the original model survives. (This paper was presented at the Soutwest Economic Theory Conference in March, 2005.)