a) Define negative reciprocity, and b) explain why this is the way that our current market-based system works (“rational” actions). c) Explain how negative reciprocity can only exist when there is a total lack of social relationships, cultural values, morals, etc.
- a) Define negative reciprocity, and b) explain why this is the way that our current market-based system works (“rational” actions). c) Explain how negative reciprocity can only exist when there is a total lack of social relationships, cultural values, morals, etc.
Negative Reciprocity is a situation that occurs when a party tries to get more from the exchange as compared to the other party. It can be done through deception, bargaining, stealing, or even selling eatables at an inflated price due to no other available option to sell those products. It also occurs due to the reciprocity principle which states that there are various social situations in individuals pay back what they received from others for eg, in marriages, birthday gifts, etc where people exchange gifts. So, in such situations, negative reciprocity happens when an action has some negative effect on someone else is reciprocated with an action that has the approximately equal or the same effect on another. In international trade, retaliations are particularly designed to be fair as per the negative reciprocity fairness.
b) This will occur when one entity attempts to receive a more valued thing than the person gives in return. Therefore, negative reciprocity is a situation where parties involved in the exchange attempt to get better of each other. Transactions between enemies or strangers mostly lead to negative reciprocity.
In the present market-based system, exchanges of gifts are usually reciprocal as if a person receives a gift, the person is obliged to repay it with some other gift. Exchanges based on reciprocity mostly don't redistribute the wealth of the society in such a way which make some people richer than others but instead, they lead to the circulation of services and goods in the economy so both the parties involved in the exchange will receive something in return due to which there is no net economic loss. Also, the present market-based system occurs due to the advantage of a situation. For example, suppose there is a neighbor Miss X who is shifting to a new city. She deliberately wants to sell her car before leaving the city. The car is new and cost her $25,000. The neighbor next to her offers her $10,000 which she accepts because she doesn't have any other choice. So, the neighbor here has taken advantage of her situation which has resulted in negative reciprocity. Apart from this, the rational actions of people involved in exchange also result in negative reciprocity. Buyers always want to maximize their satisfaction with less cost and for that, they bargain very hard with the seller. similarly, sometimes, the seller also either charges very high or too low prices to maximize the profits as per the situation which will affect negatively the other party.
A high willingness for negative reciprocity where an individual is prepared to take revenge, without considering it costs, can further not only reduce the profits but also lead to situations where others also consider this as non-cooperative behavior.
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