This thesis investigates the economic implications of reciprocity in teams and markets, provides evidence for the power and limitations of reciprocity and illustrates the significant effect alterations in institutional rules can exert on outcomes. The following four questions are addressed: First, does reciprocity give rise to leading by example in teams and do leaders make a difference? Second, can peer punishment enhance cooperation in teams when it is difficult to identify free riders? Third, can reciprocity sustain group lending schemes in microfinance institutions? Fourth, can reciprocal loyalty help overcome market failures in markets with incomplete information about quality?