Joel Sobel discusses the limitations of traditional economic models that assume rationality and individual greed, arguing that these models fail to explain behaviors like reciprocity and altruism. He introduces the concept of intrinsic reciprocity, where preferences depend on others' consumption and past actions. This allows individuals to sacrifice their own material well-being to increase or decrease others' consumption based on perceived kindness or meanness. Traditional views of reciprocity as a result of self-interest are challenged, with models of intrinsic reciprocity offering clearer explanations of economic phenomena. Sobel presents a stylized example of a fired employee destroying company property, illustrating how traditional models fail to explain such behavior. He explores various models, including interdependent preferences, generalized consumption goods, and repeated games, each offering different explanations for the behavior. The paper argues that models of intrinsic reciprocity provide a more intuitive and useful perspective on economic behavior. Sobel also discusses the implications of these models for understanding economic interactions, such as in the ultimatum game, where traditional models fail to predict observed behavior. The paper concludes that models of intrinsic reciprocity and interdependent preferences offer a more comprehensive understanding of economic behavior than traditional models.Joel Sobel discusses the limitations of traditional economic models that assume rationality and individual greed, arguing that these models fail to explain behaviors like reciprocity and altruism. He introduces the concept of intrinsic reciprocity, where preferences depend on others' consumption and past actions. This allows individuals to sacrifice their own material well-being to increase or decrease others' consumption based on perceived kindness or meanness. Traditional views of reciprocity as a result of self-interest are challenged, with models of intrinsic reciprocity offering clearer explanations of economic phenomena. Sobel presents a stylized example of a fired employee destroying company property, illustrating how traditional models fail to explain such behavior. He explores various models, including interdependent preferences, generalized consumption goods, and repeated games, each offering different explanations for the behavior. The paper argues that models of intrinsic reciprocity provide a more intuitive and useful perspective on economic behavior. Sobel also discusses the implications of these models for understanding economic interactions, such as in the ultimatum game, where traditional models fail to predict observed behavior. The paper concludes that models of intrinsic reciprocity and interdependent preferences offer a more comprehensive understanding of economic behavior than traditional models.