When we take a cab we may feel cheated if the driver takes an unnecessarily long route despite the lack of a contract or promise to take the shortest possible path. Is our decision to take the cab affected by our belief that we may end up feeling cheated? Is the behavior of the driver affected...

Trust beliefs are heterogeneous across individuals and, at the same time, persistent across generations. We investigate one mechanism yielding these dual patterns: false consensus. In the context of a trust game experiment, we show that individuals extrapolate from their own type when forming...

We investigate the relationship between individual trust and individual economic performance. We find that individual income is hump-shaped in a measure of intensity of trust beliefs. Our interpretation is that highly trusting individuals tend to assume too much social risk and to be cheated...

Using peer-to-peer (P2P) lending as an example, we show that learning by doing plays an important role in alleviating the information asymmetry between market players. Although the P2P platform (Prosper.com) discloses part of borrowers' credit histories, lenders face serious information problems...

Increased competition from the Internet has raised a concern of product quality for online prescription drugs. The Food and Drug Administration (FDA) prohibits the importation of unapproved drugs into the US and the National Association of Boards of Pharmacy (NABP) emphasizes their illegality...

We examine the effect of direct-to-consumer advertising (DTCA) of drug treatment on an important health habit, physical exercise. By learning the existence of a new drug treatment via DTCA, rational consumers may become careless about maintaining healthy lifestyles. Using the National Health...