Fairness, trust & reciprocity

Standard economics often assumes people care only about their own payoff, but experiments show that fairness, trust, and reciprocity shape real decisions. In the ultimatum game, people reject 'free' money when a split feels unfair — paying a personal cost to punish an unequal offer — evidence of inequity aversion that pure self-interest can't explain. In the trust game, people send money to a stranger who could simply keep it, and the stranger often reciprocates, because trust creates a surplus that reciprocity sustains. These other-regarding preferences — caring about how outcomes are distributed and repaying kindness with kindness — help solve cooperation problems that self-interest alone would leave broken. They are the behavioural foundation of social capital: the norms of fairness and reciprocity that let strangers do business, and a reason high-trust societies tend to be more prosperous.