Abstract
Law and economics scholars have attempted to explain the process by which compensatory justice (payment of damages) has replaced retributive justice (exercise of revenge) in ancient and primitive legal systems. While this process is well-documented, legal anthropologists have noted that both forms of justice can coexist for extended periods. Revenge prevails in interactions between groups separated by significant social distances. As these distances decrease, compensation becomes more common, eventually replacing revenge. However, once social distance becomes very small – for example, between close kin – retributive justice returns. This paper explains this pattern, using a game-theoretic model. It suggests that two factors shape the form of justice that is adopted: the need for a reputation for resolve, and the degree of utility correlation among group members. When social distance is large, exercising powerful, or even exaggerated, revenge is necessary for building a reputation, which deters predatory behavior. With social ties growing stronger, the importance of resonant acts of revenge decreases, and compensation becomes the preferred method for resolving conflicts. However, when social distance approaches zero, utility correlation turns compensatory payments into zero-sum transfers. Retributive justice regains precedence, though in milder forms – just sufficient to deter intentional wrongdoing.