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Payment Scheme Self-Selection in the Credence Goods Market: An Experimental Study

Hernan Bejarano (), Ellen Green and Stephen Rassenti

Working Papers from Chapman University, Economic Science Institute

Abstract: Given heterogeneity in expert behavior across payment schemes in credence goods markets, it becomes important to understand the consequences of payment scheme selection. To study the effect on customer well being of expert self-selection, we recruited subjects to participate in a real-effort credence good laboratory market. Experts were either randomly assigned or faced with the choice of three payment schemes: fee-for-service, salary, and capitation. We found that experts who selected fee-for-service payment resulted in customers with significantly worse outcomes in comparison with experts who had been randomly assigned to fee-for-service. In contrast, experts who selected salary payment did not change customer outcomes relative to those who were randomly assigned.

Keywords: Credence Goods; Self-Selection; Fee-for-service; Capitation; Payment; Sorting (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-exp and nep-pay
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http://www.chapman.edu/research-and-institutions/e ... ce-Goods-Market1.pdf

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Persistent link: https://EconPapers.repec.org/RePEc:chu:wpaper:16-04

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