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 use a repeated survey of an Italian bank's clients to test whether investors' risk aversion increases following the 2008 financial crisis. We find that both a qualitative and a quantitative measure of risk aversion increases substantially after the crisis. After considering standard...

We study which dimensions of corporate culture are related to a firm's performance and why. We find that proclaimed values appear irrelevant. Yet, when employees perceive top managers as trustworthy and ethical, firm's performance is stronger. We then study how different governance structures...

Entering a currency union without any political union European countries have taken a gamble: will the needs of the currency union force a political integration (as anticipated by Monnet) or will the tensions create a backlash, as suggested by Kaldor, Friedman and many others? We try to answer...

How much do cultural biases affect economic exchange? We try to answer this question by using the relative trust European citizens have for citizens of other countries. First, we document that this trust is affected not only by objective characteristics of the country being trusted, but also by...

We study the effects of differences in local financial development within an integrated financial market. To do so, we construct a new indicator of financial development by estimating a regional effect on the probability that, ceteris paribus, a household is shut off from the credit market. By...

The empirical evidence on rational inattention lags far behind the theoretical developments: micro evidence on the most immediate consequence of observation costs − the infrequent observation of state variables − is not available in standard datasets. We contribute to filling the gap with...

This chapter reviews the recent debate about the role of social capital in economics. We argue that all the difficulties this concept has encountered in economics are due to a vague and excessively broad definition. For this reason, we restrict social capital to the set of values and beliefs...

We use survey data to study American households' propensity to default when the value of their mortgage exceeds the value of their house even if they can afford to pay their mortgage (strategic default). We find that 26% of the existing defaults are strategic. We also find that no household...