The Impact of Distributional Preferences on (Experimental) Markets for Expert Services

Rudolf Kerschbamer, Matthias Sutter and Uwe Dulleck

No 4647, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Credence goods markets suffer from inefficiencies arising from informational asymmetries between expert sellers and customers. While standard theory predicts that inefficiencies disappear if customers can verify the quality received, verifiability fails to yield efficiency in experiments with endogenous prices. We identify heterogeneous distributional preferences as the main cause and design a parsimonious experiment with exogenous prices that allows classifying experts as either selfish, efficiency loving, inequality averse, inequality loving or competitive. Results show that most subjects exhibit non-standard distributional preferences, among which efficiency-loving and inequality aversion are most frequent. We discuss implications for institutional design and agent selection in credence goods markets.

Keywords: distributional preferences; credence goods; verifiability; experiment (search for similar items in EconPapers)
JEL-codes: C72 C91 D82 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2009-12
New Economics Papers: this item is included in nep-exp and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Published - published with new title "How social preferences shape incentives in (experimental) markets for credence goods" in: Economic Journal, 2017, 127, 393-416.

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Working Paper: The Impact of Distributional Preferences on (Experimental) Markets for Expert Services (2009)
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