incentives and exacerbates another moral hazard problem in credit markets ﾖ the choice of inefficient high-risk projects …

Under weak contract enforcement the trading parties’ trust, defined as their belief in other’s trustworthiness, appears … important for realizing gains from trade. In contrast, under strong contract enforcement beliefs about other’s trustworthiness … appear less important, suggesting that trust and contract enforcement are substitutes. Here we show, however, that trust and …