Abstract

In a series of seven experiments, conducted in both field and laboratory settings, we demonstrate in the context of small informal loans between friends, that individuals operate under different mindsets depending on their role in the loan (lender vs. borrower), which consequently leads to misaligned repayment expectations. Lenders, operating under a communal mindset, do not expect borrowers to repay small amounts that borrowers, operating under an exchange mindset, intend to repay. Paradoxically, we also find support that lenders (vs. borrowers) hold stronger memories of microloaning incidences. We explain how the two-mindset hypothesis can reconcile these seemingly contradicting results, as well as why many small informal debts remain unpaid. We discuss the contribution to social and economics literature, implications for interpersonal relationships, and directions for future research.

Please contact dip.mkt@unibocconi.it if you wish to attend.