We report the results of a laboratory experiment which examines the impact of precontractualcommunication in person-to-person lending. We show that potential hiddenaction undermines the positive effect of communication on repayment behavior and creditprovision. When strategic defaults by...

We study the impact of pre-contractual communication on market outcomes when economic relationships are subject to hidden action. Our experiment is framed in a credit market context and borrowers (second movers) can communicate with lenders (first movers) prior to entering the credit...

In recent years, many social scientists have claimed that trust plays an important role in economic and social transactions. Despite its proposed importance, the measurement and the definition of trust seem to be not fully settled, and the identification of the exact role of trust in economic...

In recent years, many social scientists have claimed that trust plays an important role in economic and social transactions. Despite its proposed importance, the measurement and the definition of trust seem to be not fully settled, and the identification of the exact role of trust in economic...

This paper shows that a principal's distrust in the voluntary performanceof an agent has a negative impact on the agent's motivation to perform well.

We show experimentally that a principal?s distrust in the voluntary performance of an agent has a negative impact on the agent?s motivation to perform well. Before the agent chooses his performance, the principal in our experiment decides whether he wants to restrict the agents? choice set by...

Recent theoretical contributions depart from the usual practice of treating individual attitude endowments as a black box, by assuming that these are shaped by the attitudes of parents and other role models. Attitudes include fundamental preferences such as risk preference, and crucial beliefs...