Serving Consumers in an Uncertain World: A Credence Goods Experiment

Loukas Balafoutas, Helena Fornwagner, Rudolf Kerschbamer, Matthias Sutter and Maryna Tverdostup
Additional contact information
Helena Fornwagner: University of Exeter, United Kingdom; Austrian Institute of Economic Research (WIFO)
Maryna Tverdostup: Vienna Institute for International Economic Studies, Austria

No 258, ECONtribute Discussion Papers Series from University of Bonn and University of Cologne, Germany

Abstract: Credence goods markets are prone to fraudulent behavior and market inefficiencies due to informational asymmetries between sellers and customers. We examine experimentally the effects of diagnostic uncertainty and insurance coverage on the information acquisition and provision decisions by sellers and the trading decisions by consumers. Our results reveal that diagnostic uncertainty is a major source of inefficiency by decreasing efficient service provision. Insurance coverage has a positive net effect on market efficiency, despite making information acquisition and efficient service provision less likely. We also examine the role of -s and of sellers’ prosociality in shaping service provision and information acquisition.

Keywords: Credence goods; diagnostic uncertainty; insurance coverage; experiment (search for similar items in EconPapers)
JEL-codes: C91 D82 G22 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2023-10
New Economics Papers: this item is included in nep-exp
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https://www.econtribute.de/RePEc/ajk/ajkdps/ECONtribute_258_2023.pdf First version, 2023 (application/pdf)

Related works:
Working Paper: Serving consumers in an uncertain world: A credence goods experiment (2023)
Working Paper: Serving consumers in an uncertain world: A credence goods experiment (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:ajk:ajkdps:258

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