The principal focus in the substantial literature on impediments to economic development has been on the inadequacies of policies and governance. However, successful economic development requires effectiveness of markets and incentives for investment, which in turn require trust. This paper...

Confidence can have important economic consequences. Existing research has largely focused on overconfidence, ignoring systematic variation in confidence. Building on sociological and social psychological research, this paper examines the impact of mere inequality on confidence in an...

Mancur Olson and Robert Putnam provide two conflicting views on the effect of involvement with voluntary associations on their members. Putnam argues that associations instill in their members habits of cooperation, solidarity and public spiritedness. Olson emphasizes the tendency of groups to...

We study optimal insurance demand for a risk- and ambiguity-averse consumer under ambiguity about contract nonperformance. Ambiguity aversion lowers optimal insurance demand and the consumer's degree of ambiguity aversion is negatively associated with the optimal level of coverage. A more...

Many studies have shown that people display an apparent overconfidence. In particular, it is common for a majority of people to describe themselves as better than average. The literature takes for granted that this better-than-average effect is problematic. We argue, however, that, even...

We study informational dissociations between decisions and decision confidence. We explore the consequences of a dual-system model: the decision system and confidence system have distinct goals, but share access to a source of noisy and costly information about a decision-relevant variable. The...

Repeat transactions are not necessarily the rule in today's global economy. Indirect reputation systems, where buyers base their decisions on a seller's previous interactions with other buyers, are a potential substitute for personal interactions - provided such information is available. This...

We analyze efficient risk-sharing arrangements when the value from deviating is determined endogenously by another risk sharing arrangement. Coalitions form to insure against idiosyncratic income risk. Self-enforcing contracts for both the original coalition and any coalition formed (joined)...

Recent studies report that productivity increases under tournament reward structures than under piece rate reward structures. We conduct maze-solving experiments under both reward structures and reveal that overconfidence is a significant factor in increasing productivity. Specifically, subjects...

Die Arbeitslosigkeit in Deutschland ist auf dem niedrigsten Stand seit der Wiedervereinigung. Dies hat auch zur Folge, dass die Lebenszufriedenheit in Deutschland auf einen Höchststand angestiegen ist. Denn erwerbstätige Menschen geben eine signifikant höhere allgemeine Lebenszufriedenheit an...