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Dulleck, Uwe,
Rudolf Kerschbamer, and
Matthias Sutter. 2011. "The Economics of Credence Goods: An Experiment on the Role of Liability, Verifiability, Reputation, and Competition."
,
101(2): 526-55.
Show Article Details
DOI: 10.1257/aer.101.2.526
Abstract:Credence goods markets are characterized by asymmetric information
between sellers and consumers that may give rise to inefficiencies, such as under- and overtreatment or market breakdown. We study in a large experiment with 936 participants the determinants for efficiency in credence goods markets. While theory predicts that liability or verifiability yield efficiency, we find that liability has a
crucial, but verifiability at best a minor, effect. Allowing sellers to build up reputation has little influence, as predicted. Seller competition drives down prices and yields maximal trade, but does not lead
to higher efficiency as long as liability is violated. (JEL D12, D82)
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Online Appendix
Authors:
Dulleck, Uwe (Queensland U Technology)
Kerschbamer, Rudolf (U Innsbruck)
Sutter, Matthias (U Innsbruck and U Gothenburg)
JEL Classifications:
D12: Consumer Economics: Empirical Analysis
D82: Asymmetric and Private Information
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