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Credence Goods Markets and the Informational Value of New Media: A Natural Field Experiment

Rudolf Kerschbamer (), Daniel Neururer () and Matthias Sutter ()
Additional contact information
Daniel Neururer: University of Innsbruck

No 12184, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Credence goods markets are characterized by pronounced informational asymmetries between consumers and expert sellers. As a consequence, consumers are often exploited and market efficiency is threatened. However, in the digital age, it has become easy and cheap for consumers to self-diagnose their needs using specialized webpages or to access other consumers' reviews on social media platforms in search for trustworthy sellers. We present a natural field experiment that examines the causal effect of information acquisition from new media on the level of sellers' price charges for computer repairs. We find that even a correct self-diagnosis of a consumer about the appropriate repair does not reduce prices, and that an incorrect diagnosis more than doubles them. Internet ratings of repair shops are a good predictor of prices. However, the predictive valued of reviews depends on whether they are judged as reliable or not. For reviews recommended by the platform Yelp we find that good ratings are associated with lower prices and bad ratings with higher prices, while non-recommended reviews have a clearly misleading effect, because non-recommended positive ratings increase the price.

Keywords: credence goods; fraud; information acquisition; internet; field experiment (search for similar items in EconPapers)
JEL-codes: C93 D82 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2019-02
New Economics Papers: this item is included in nep-com, nep-cul, nep-exp, nep-ict, nep-law, nep-mkt and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25) Track citations by RSS feed

Published - extended version published as 'Credence goods markets, online information and repair prices: A natural field experiment' in: Journal of Public Economics, 2023, 220, 104891

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Working Paper: Credence Goods Markets and the Informational Value of New Media: A Natural Field Experiment (2019) Downloads
Working Paper: Credence goods markets and the informational value of new media: A natural field experiment (2019) Downloads
Working Paper: Credence goods markets and the informational value of new media: A natural field experiment (2019) Downloads
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