# Research

2005
Iris Bohnet,, & Kübler, D. (2005). Compensating the cooperators: is sorting in the prisoner’s dilemma possible? Journal of Economic Behavior & Organization , 56, 61–76. Publisher's VersionAbstract
Choice between different versions of a game may provide a means of sorting. We experimentally investigate whether auctioning off the right to play a prisoner’s dilemma game in which the cost of unilateral cooperation is lower than in the status quo version separates (conditional) cooperators from money maximizers. After the auction, significantly more subjects cooperate in the modified {PD} than in the status quo {PD}, whereas there is no difference between cooperation rates if the two versions of the game were assigned to participants. However, sorting is incomplete and cooperation deteriorates over time.
Iris Bohnet,, Harmgart, H., (ucl), S. H., & Tyran, J. - R. (2005). Learning Trust. Journal of the European Economic Association , 3 322–329. Publisher's VersionAbstract
We examine the effects of different forms of feedback information on the performance of markets that suffer from moral hazard problems due to sequential exchange. As orthodox theory would predict, we find that providing buyers with information about sellers' trading history boosts market performance. More surprisingly, this beneficial effect of incentives for reputation building is considerably enhanced if sellers, too, can observe other sellers' trading history. This suggests that two-sided market transparency is an important ingredient for the design of well-functioning markets that are prone to moral hazard. ({JEL}: C72, C91, L14)
Iris Bohnet,. (2005). Status Anxiety - Harvard Business Review. Publisher's VersionAbstract
Like it or not, concerns about status pervade our negotiations. Most of us are less likely to accept a job offer, even one that would be a substantial improvement on our current job, if it is worse than an offer made to a peer. Even when hammering out seemingly dry, factual purchasing terms, we take time to look around and see how others in our shoes are doing. The desire to achieve better outcomes than others–from friends to coworkers to competitors–can cause you to leave real money on the table. This article introduces you to the basics of status concerns, shows you when status issues are likely to crop up during negotiation, and teaches you how to use status concerns to improve your negotiated outcomes.
2004
Iris Bohnet,, & Huck, S. (2004). Repetition and Reputation: Implications for Trust and Trustworthiness When Institutions Change. The American Economic Review , 94, 362–366. Publisher's Version
Iris Bohnet,, & Zeckhauser, R. (2004). Social Comparisons in Ultimatum Bargaining. Scandinavian Journal of Economics , 106, 495–510. Publisher's VersionAbstract

Experiments are used to examine the effects of social comparisons in ultimatum bargaining. We inform responders about the average offer before they decide whether to accept or reject their specific offer. This significantly increases offers and offer-specific rejection probabilities. For comparison, we consider another change in informational conditions: telling responders the total pie is \$30—ex ante it was either \$15 or \\$30—affects offers and rejection probabilities roughly as much. Our results are consistent with people’s dislike for deviations from the norm of equity but inconsistent with fairness theories, where people dislike income disparity between themselves and their referents.

2003
Iris Bohnet,, & Zeckhauser, R. J. (2003). Trust, Risk and Betrayal. Journal of Economic Behavior & Organization , 55 (4), 467–484 . Rochester, {NY}, Social Science Research Network. Publisher's VersionAbstract

Using experiments, we examine whether the decision to trust a stranger in a one-shot interaction is equivalent to taking a risky bet, or if a trust decision entails an additional risk premium to balance the costs of trust betrayal. We compare a binary-choice Trust game with a structurally identical, binary-choice Risky Dictator game with good or bad outcomes. We elicit individuals' minimum acceptable probabilities (MAPs) of getting the good outcome such that they would prefer the chance to the sure payoff. First movers state higher {MAPs} in the Trust game than in situations where nature determines the outcome.

2000
Iris Bohnet,, Frey, B. S., & Huck, S. (2000). More Order with Less Law: On Contract Enforcement, Trust and Crowding. The American Political Science Review , 95 (1), 131-144 . Rochester, {NY}, Social Science Research Network. Publisher's VersionAbstract

Most contracts, whether between voters and politicians or between house owners and contractors, are incomplete. "More law", it typically is assumed, increases the likelihood of contract performance by increasing the probability of enforcement and/or the cost of breach. This paper studies a contractual relationship where the first mover has to decide whether she wants to enter a contract without knowing whether the second mover will perform. We analyze how contract enforceability affects individual performance for exogenous preferences. Then we apply a dynamic model of preference adaptation and find that economic incentives have a non-monotonic impact on behavior. Individuals perform a contract when enforcement is strong or weak but not with medium enforcement probabilities. Trustworthiness is "crowded in" with weak and "crowded out" with medium enforcement. In a laboratory experiment we test our model's implications and find support for the crowding prediction. Our finding is in line with the recent work on the role of contract enforcement and trust in formerly Communist countries.

1999
Iris Bohnet,, & Frey, B. S. (1999). Social Distance and Other-Regarding Behavior in Dictator Games: Comment. American Economic Review , 89, 335–339. Publisher's Version
Iris Bohnet,, & Frey, B. S. (1999). The sound of silence in prisoner's dilemma and dictator games. Journal of Economic Behavior & Organization , 38, 43–57. Publisher's VersionAbstract

Communication increases contributions to public goods. Our experimental results indicate that communication is not always required. Silent identification suffices to raise solidarity in prisoner's dilemma and dictator games. Increases in solidarity are not only due to expectations of reciprocity. While mutual identification induces individuals to converge to the social norm, the spread of the distribution of choices increases with one-way identification and with communication. As others are no longer faceless entities, one-way identification decreases social distance, inducing interaction-specific solutions. Communication allows more information to be transferred and, therefore, more scope for abandoning the norms.

1997
Oberholzer-Gee, F., Iris Bohnet,, & Frey, B. S. (1997). Fairness and Competence in Democratic Decisions. Public Choice , 91, 89–105. Publisher's VersionAbstract

The price system is generally thought to be the epitome of efficiency. In some cases, however, lotteries are preferred to the market as a social decision-making system for reasons of fairness. As recent research has shown, neither procedure is always well accepted among the general population. We analyze the social acceptability of both mechanisms and apply our framework to the allocation of social burdens, namely the siting of nuclear waste facilities. Lotteries are only acceptable if they are applied to a set of efficient options. The market is accepted if the production of fairness precedes the use of prices.

Iris Bohnet,, & Frey, B. S. (1997). Rent Leaving. Journal of Institutional and Theoretical Economics ({JITE}) / Zeitschrift für die gesamte Staatswissenschaft , 153, 711–721. Publisher's VersionAbstract

Economic rents are the driving force of market economies. Resource owners constantly look for opportunities to create and exploit economic rents which, however, in the dynamics of the market process dissipate as new entrants try to appropriate the profits. In equilibrium, economic rents are eliminated. Not so in different institutional settings. While rents in the market endogenously come and go, they are artificially created and sustained in political and bureaucratic decisionmaking. In analogy to individuals’ behaviour in the market, it is assumed that politicians, bureaucrats, pressure groups, voters and taxpayers strive for political rents. Rent seeking in the political arena may also increase an individual’s income but in contrast to the market, is not socially beneficial. “The term rent seeking is designed to describe behavior in institutional settings where individual efforts to maximize value generate social waste rather than social surplus” (Buchanan 1980, 4).