The Good, the Bad and the Naive: Do fair prices signal good types or do they induce good behaviour?
David Johnston (),
Rudolf Kerschbamer () and
Matthias Sutter ()
No 81, NCER Working Paper Series from National Centre for Econometric Research
Evidence on behavior of experts in credence goods markets raises an important causality issue: Do "fair prices" induce "good behavior", or do "good experts" post "fair prices"? To answer this question we propose and test a model with three seller types: "the good" choose fair prices and behave consumer-friendly; "the bad" mimic the good types' price-setting, but cheat on quality; and "the naive" fall victim to a projection bias that all sellers behave like the bad types. OLS, sample selection and fixed effects regressions support the model's predictions and show that causality goes from good experts to fair prices.
Keywords: Credence Goods; Experts; Pricing (search for similar items in EconPapers)
JEL-codes: C91 L15 D82 D40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp
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Working Paper: The good, the bad and the naive: Do fair prices signal good types or do they induce good behaviour? (2012)
Working Paper: The Good, the Bad and the Naive: Do Fair Prices Signal Good Types or Do They Induce Good Behaviour? (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:qut:auncer:2012_4
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