While social relationships play an important role for individuals to cope with missing market institutions, they also limit individuals' range of trading partners. This paper aims at understanding the determinants of trust at various social distances when information asymmetries are present....

While social relationships play an important role for individuals to cope with missing market institutions, they also limit individuals' range of trading partners. This paper aims at understanding the determinants of trust at various social distances when information asymmetries are present....

We present a dynamic model that illustrates three forces that shape the effect of overconfidence (overprecision of consumed information) on the amount of collected information. The first force comes from overestimating the precision of the next consumed piece of information. The second force is...

We extend Akerlof (1970)'s 'Market for Lemons' by assuming that some buyers are overconfident. Buyers in our model receive a noisy signal about the quality of the good that is on display for sale. Overconfident buyers do not update according to Bayes' rule but take the noisy signal at face...

We study trust building in credence goods markets in a dynamic setting. An extreme lemon problem arises in the one-shot game and results in no trade. In the repeated game, an expert's honesty is monitored through consumers' rejection of his recommendations. We characterize the optimal...

The problem of optimally designing information for multiple agents who interact in a game can be formulated as a linear program. We explore its dual representation and show that it provides a novel perspective and new economic insights into the information-design problem. Through the lens of the...