Price competition and reputation in credence goods markets: Experimental evidence

Wanda Mimra (), Alexander Rasch and Christian Waibel
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Wanda Mimra: ETH Zurich, Switzerland

No 13/176, CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich

Abstract: In credence goods markets, experts have better information about the appropriate quality of treatment than their customers. As experts provide both diagnosis and treatment, this leaves scope for fraud. We experimentally investigate how intensity of price competition and the level of customer information about past expert behavior influence an expert’s incentive to defraud his customers when the expert can build up reputation. We show that the level of fraud is significantly higher under price competition than when prices are fixed. The price decline under competitive prices superimposes quality competition. More customer information does not necessarily decrease the level of fraud.

Keywords: Credence good; Expert; Fraud; Price competition; Reputation; Overcharging; Undertreatment. (search for similar items in EconPapers)
JEL-codes: D82 L15 (search for similar items in EconPapers)
Pages: 67 pages
Date: 2013-03
New Economics Papers: this item is included in nep-com, nep-cta, nep-exp and nep-mkt
References: View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Related works:
Journal Article: Price competition and reputation in credence goods markets: Experimental evidence (2016)
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