171 Reasons for Conﬂict: Lessons from Bargaining Experiments by ARMIN FALK,ERNST FEHR, AND URS FISCHBACHER ∗ In this paper we experimentally study the effects of fairness, spite, and reputation formation on conﬂict. We show that fairness preferences are a potential source of conﬂict and that intentions play an important role in the perception of fairness. Further, we show that feelings of spite may affect the occurrence of conﬂict. Fi- nally, we study reputation formation as a possible source of conﬂict. We show that people invest in a reputation of being a tough bargainer. This does not automati- cally increase conﬂict, however. The reason is that through reputation, information about one’s opponent is much better than in anonymous bargaining. (JEL: A 13, D 63, D 23, C 92, K 42) 1 Introduction In this paper we experimentally study three possible sources of conﬂict: fairness, spite, and reputation formation. Fairness is a possible source of conﬂict because the feeling of being treated unfairly may lead to destructive, efﬁciency-reducing actions. A prime example is in labor relations, where unfair treatment by the ﬁrm (e.g., low wages or poor working conditions) may provoke workers to initiate strikes or to shirk. In several questionnaire studies (e.g., AGELL AND LUNDBORG [1995], BEWLEY [1999]) personnel managers indicate that even in recessions ﬁrms are unwilling to cut wages because they fear that pay cuts will be perceived as unfair by the workers and will hence invite shirking or destructive actions. Although by now a large literature has emerged that shows the relevance of fairness considerations in general, the precise determinants of what is considered as fair and unfair are still largely unknown. One important question concerns the role of intentions. Is perceived fairness solely determined by the consequences of an action, or (also) ∗ Financial support by the Swiss National Science Foundation (Project No. 1214- 05100.97) and by the MacArthur Foundation (Network on Economic Environments and the Evolution of Individual Preferences and Social Norms) is gratefully acknow- ledged. This paper is also part of the EU-TMR Research Network ENDEAR (FMRX- CTP98-0238). We thank Christoph Engel, Gerd Gigerenzer, Jörg Oechssler, and the participants in the 20th International Seminar on New Institutional Economics in Wör- litz for helpful comments. Journal of Institutional and Theoretical Economics JITE 159 (2003), 171–187  2003 Mohr Siebeck – ISSN 0932-4569