Serving consumers in an uncertain world: A credence goods experiment

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECONtribute Discussion Paper ; No. 258

Classification and Topics

• Classification: Wirtschaft ; Design of Experiments: Laboratory, Individual ; Asymmetric and Private Information; Mechanism Design ; Insurance; Insurance Companies; Actuarial Studies
• Subject: Credence goods ; diagnostic uncertainty ; insurance coverage ; experiment

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Balafoutas, Loukas ; Fornwagner, Helena ; Kerschbamer, Rudolf ; Sutter, Matthias ; Tverdostup, Maryna
• Event: Veröffentlichung
• (who): University of Bonn and University of Cologne, Reinhard Selten Institute (RSI)
• (where): Bonn and Cologne
• (when): 2023

Further information

• Handle: http://hdl.handle.net/10419/283300
• Last update: 10.03.2025, 11:42 AM CET