Pricing favors: Some evidence on the efficiency of backscratching

Abstract

Backscratching is the trading of favors and the economic basis of much of the informal cooperation that goes on inside organizations and in society. The experiment we present investigates the efficiency of backscratching. We find that people are, for the most part, good at coordinating the exchange of favors, even when restricted to tacit bargaining, and even when there is an asymmetry to the payoffs of the favors exchanged. Transactions nevertheless tend to have low social efficiency because of the way the favors are priced. © 2006 International Society of Political Psychology.