Serving consumers in an uncertain world: A credence goods experiment

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

No 2023_11, Discussion Paper Series of the Max Planck Institute for Research on Collective Goods from Max Planck Institute for Research on Collective Goods

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)
Date: 2023-10
New Economics Papers: this item is included in nep-com, nep-eur and nep-exp
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https://www.coll.mpg.de/pdf_dat/2023_11online.pdf (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:mpg:wpaper:2023_11

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