Seminar Normative Expectations of Reciprocal Negotiators

This paper develops a theoretical framework to examine how normative expectations--what one considers others should do based on their fairness perceptions--in shaping the behavior of players with reciprocal preferences in a public goods game. Standard reciprocity models typically assumes uniform, exogenously determined, and moderate expectations. By contrast, I allow players to (i) vary in how demanding they are of others, (ii) disagree about what counts as fair, and (iii) form self-centered normative expectations endogenously. In noncooperative play, strong reciprocal concerns transform the payoff structure from a material payoff dilemma into a coordination game in utilities but not always. In coalition formation, three central results emerge: (i) the empty coalition is always stable, (ii) the grand coalition becomes stable once reciprocal concerns are sufficiently strong, and (iii) partial coalitions can be stable under specific conditions. Exogenous expectations create distinct effects on cooperation: lower expectations facilitate the stability of the grand coalition, whereas higher expectations increase the size of partial coalitions, potentially leading to a majority coalition. This latter finding is more consistent with empirical observation.