How social preferences shape incentives in (experimental) markets for credence goods

Kerschbamer, Rudolf, Sutter, Matthias, & Dulleck, Uwe (2016) How social preferences shape incentives in (experimental) markets for credence goods. The Economic Journal. (In Press)

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Credence goods markets suffer from inefficiencies caused by superior information of sellers about the surplus-maximising 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 with respect to heterogeneity in social preferences as a possible cause of this and conduct new experiments that allow for parsimonious identification of sellers’ social preference types. Our results confirm the assumed heterogeneity in social preferences and provide strong support for our explanation of the failure of verifiability to increase efficiency.

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ID Code: 93375
Item Type: Journal Article
Refereed: Yes
DOI: 10.1111/ecoj.12284
ISSN: 0013-0133
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Economics & Finance
Copyright Owner: Copyright 2015 The Authors
Deposited On: 06 Mar 2016 22:31
Last Modified: 08 Mar 2016 05:25

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