How distributional preferences shape incentives on (experimental) markets for credence goods

Kerschbamer, Rudolf, Sutter, Matthias, & Dulleck, Uwe (2013) How distributional preferences shape incentives on (experimental) markets for credence goods. In Botticini , Maristella , Abbring, Jaap, & Biais, Bruno (Eds.) Proceedings of EEA-ESEM2013, Gothenburg, Sweden, pp. 1-40.

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Credence goods markets suffer from inefficiencies caused by superior information of sellers about the surplus-maximizing quality. While standard theory predicts that equal mark-up prices solve the credence goods problem if customers can verify the quality received, experimental evidence indicates the opposite. We identify a lack of robustness of institutional design with respect to heterogeneity in distributional preferences as a possible cause and design new experiments that allow for parsimonious identification of sellers’ distributional types. Our results indicate that less than a fourth of the subjects behave according to standard theory’s assumption, the rest behaving either in line with non-standard selfish or in accordance with non-trivial other-regarding preferences. We discuss consequences of our findings for institutional design and agent selection.

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ID Code: 62825
Item Type: Conference Paper
Refereed: Yes
Additional URLs:
Keywords: Credence Goods , Expert services, Distributional preferences, Other-regarding preferences, Behavioural economics, Experimental economics
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Economics & Finance
Copyright Owner: Copyright 2013 [please consult the author]
Deposited On: 10 Dec 2013 23:00
Last Modified: 25 Mar 2014 15:24

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