Repetition and Reputation: Implications for Trust and Trustworthiness When Institutions Change by Iris Bohnet and Steffen Huck. Published in volume 94, issue 2, pages 362-366 of American Economic Review, May 2004

A surprisingly large amount of otherregarding behavior is the common finding of experiments on bargaining, public goods, and trust. Elizabeth Hoffman et al. ( hereafter, HMS ) ( 1996 ) have provided an insightful analysis of why experimental results deviate from game theoretic predictions in dictator games. The authors conclude that individuals’ dispositional knowledge about social norms and reciprocity is activated by decreasing social distance even though the dictator game explicitly excludes reciprocal sanctioning possibilities by experimental design. We challenge this conclusion. While HMS (p. 654) define social distance to be ‘‘the degree of reciprocity that subjects believe exist within a social interaction,’’ we argue that social distance influences otherregardedness independent of any norms of social exchange. When social distance decreases, the ‘‘other’’ is no longer some unknown individual from some anonymous crowd but becomes an ‘‘identifiable victim’’ (Thomas C. Schelling 1968). In order to discriminate between reciprocity-based and identifiabilitybased other-regardedness, we also used the dictator game and varied the degree of social distance. An anonymous treatment is com-

Why is private investment so low in Gulf compared to Western countries? We investigate cross-regional differences in trust and reference points for trustworthiness as possible factors. Experiments controlling for cross-regional differences in institutions and beliefs about trustworthiness reveal that Gulf citizens pay much more than Westerners to avoid trusting, and hardly respond when returns to trusting change. These differences can be explained by subjects' gain/loss utility relative to their region's reference point for trustworthiness. The relation-based production of trust in the Gulf induces higher levels of trustworthiness, albeit within groups, than the rule-based interactions prevalent in the West.

Due to betrayal aversion, people take risks less willingly when the agent of uncertainty is another person rather than nature. Individuals in six countries (Brazil, China, Oman, Switzerland, Turkey, and the United States) confronted a binary-choice trust game or a risky decision offering the same payoffs and probabilities. Risk acceptance was calibrated by asking individuals their “minimum acceptable probability” (MAP) for securing the high payoff that would make them willing to accept the risky rather than the sure payoff. People's MAPs are generally higher when another person, rather than nature, determines the outcome. This indicates betrayal aversion. (JEL C72, D81, Z13)