Do people trust too much or too little?

Across two studies, we asked whether people trust too much or too little, relative to what an economic analysis would suggest. In the trust game paradigm, participants decided whether to hand money over to an anonymous individual who could either return more money back or keep all the money. Participants trusted too little, in that they grossly underestimated the proportion of their peers who would return money, prompting them to forgo profitable decisions to trust. However, participants also trusted too much. Given their high levels of cynicism and tolerance for risk, few should have handed money over, yet many still chose to trust. Possible explanations for this paradox of trusting "too little" yet "too much" are discussed. (C) 2008 Elsevier B.V. All rights reserved.