The Economics of Credence Goods: On the Role of Liability, Verifiability, Reputation and Competition

Uwe Dulleck, Rudolf Kerschbamer and Matthias Sutter

Working Papers from Faculty of Economics and Statistics, Universität Innsbruck

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 break-down. We study in a large experiment with 936 participants the determinants for efficiency in credence goods markets. While theory predicts that either liability or verifiability yields efficiency, we find that liability has a crucial, but verifiability only 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.

Keywords: Credence goods; Experiment; Liability; Verifiability; Reputation; Competition (search for similar items in EconPapers)
JEL-codes: C72 C91 D40 D82 (search for similar items in EconPapers)
Pages: 70
Date: 2009-02
New Economics Papers: this item is included in nep-com, nep-exp, nep-gth and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://www2.uibk.ac.at/downloads/c4041030/wpaper/2009-03.pdf (application/pdf)

Related works:
Working Paper: The Economics of Credence Goods: On the Role of Liability, Verifiability, Reputation and Competition (2009)
Working Paper: The Economics of Credence Goods: On the Role of Liability, Verifiability, Reputation and Competition (2009)
Working Paper: The Economics of Credence Goods: On the Role of Liability, Verifiability, Reputation and Competition (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inn:wpaper:2009-03

Access Statistics for this paper

More papers in Working Papers from Faculty of Economics and Statistics, Universität Innsbruck Contact information at EDIRC.
Bibliographic data for series maintained by Judith Courian ( this e-mail address is bad, please contact ).