IntroductionDescribed as the field of economics that deals with the analysis of the effect that the decision-making process has on the decisions made, behavioral economics is a field that has attracted much attention interest from various researchers (Altman, 24). Economists consider this branch of economics to be a cognitive science because it deals with the analysis of the decision-making process. Eric Wanner, an early founder of the discipline, describes this economic field as a component of cognitive science in his attempt to explain the foundations and characteristic analysis of the discipline in terms of strengths and weaknesses. In simple terms, it is a field of economics that explains the decision-making process of economic agents based on theories formulated in its various branches (Altman, 25-26). Behavioral economics is a diverse subject dealing with many topics, but for the purposes of this research paper I will focus on the labor market; equity and reciprocity. Employees as well as their employers have financial interests that they wish to realize upon entering the workforce or the sector for which employers are recruiting employees (Altman, 29-30). The employee will always seem to reciprocate any additional wages from the employer with additional input, while the employer will offer incentives to encourage additional production. Literature Review Neo-economists describe the labor market as one in which employees work for wages and employers pay wages for work performed. Arkelof's theory of fair pay stated that for an employer to pay extra money to the employee, the employee always viewed the extra money as mere compensation for the above-average work he or she did. performed (Colin, 2010...... middle of paper .. ....the effort in the tasks they perform. Fairness on the part of the employer is the determining factor in the level of performance of The essay also illustrated the impact of fairness and reciprocity on the nature or combination of employment contracts an employer decides to employ for different tasks performed by different employees. There are two categories of employees: some employees fall into the category of fair employees while the others are trustworthy employees. However, most employees are fair employees who expect fair treatment from their employers in order. that they reciprocate by increasing their production. The most popular type of engagement is the bonus system. Further research needs to be conducted to determine the relationship between fairness and reciprocity in the labor market and the demand for high-quality goods. in the product market.