Revenge and Retaliation
The Law and Economics of Irrational Behavior
This paper considers the role of retaliation norms as a way to induce more socially desirable behavior among self-interested parties. The paper first considers the unregulated case in which individuals indulge in mutual aggression, in the absence of other legal or social constraints. Next the relationship between aggressors and their victims is investigated, concentrating on the effect of victim's propensity to retaliate when suffering harm from others. Two retaliatory regimes are examined: proportional retribution and fixed retaliation. Special attention is paid to the impact of these regimes on the parties' interaction. The results suggest that human instincts for revenge may indeed be as important as honesty for the evolution of cooperation. More generally, retaliation norms are an important ingredient for the evolution of desirable social behavior in the absence of other social constraints or legal intervention.
Vincy Fon & Francesco Parisi, Revenge and Retaliation, in The Law and Economics of Irrational Behavior 141-168 (Francesco Parisi & Vernon L. Smith, eds., Stanford University Press, 2005)