The Economics of Credence Goods: An Experiment on the Role of Liability, Verifiability, Reputation, and Competition

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)

Kerschbamer, R. (författare)
Sutter, Matthias,1968Gothenburg University,Göteborgs universitet,Institutionen för nationalekonomi med statistik,Department of Economics(Swepub:gu)xsuttm (författare)
Göteborgs universitetInstitutionen för nationalekonomi med statistik (creator_code:org_t)

Ingår i:American Economic Review: American Economic Association101:2, s. 526-5550002-8282

Av författaren/redakt...: Dulleck, U.; Kerschbamer, R.; Sutter, Matthias ...

Om ämnet

SAMHÄLLSVETENSKAP: SAMHÄLLSVETENSKA ...; och Ekonomi och näri ...; och Nationalekonomi

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