The Good, the Bad and the Naive: Do Fair Prices Signal Good Types or Do They Induce Good Behaviour?

Uwe Dulleck, David Johnston, Rudolf Kerschbamer and Matthias Sutter

No 6491, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Evidence on behavior of experts in credence goods markets raises an important causality issue: Do "fair prices" induce "good behavior", or do "good experts" post "fair prices"? To answer this question we propose and test a model with three seller types: "the good" choose fair prices and behave consumer-friendly; "the bad" mimic the good types' price-setting, but cheat on quality; and "the naive" fall victim to a projection bias that all sellers behave like the bad types. OLS, sample selection and fixed effects regressions support the model's predictions and show that causality goes from good experts to fair prices.

Keywords: credence goods; experts; pricing; experiment; other regarding preferences; signalling; projection bias (search for similar items in EconPapers)
JEL-codes: C91 D40 D82 L15 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2012-04
New Economics Papers: this item is included in nep-cbe and nep-exp
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Working Paper: The good, the bad and the naive: Do fair prices signal good types or do they induce good behaviour? (2012)
Working Paper: The Good, the Bad and the Naive: Do fair prices signal good types or do they induce good behaviour? (2012)
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