Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/171619 
Year of Publication: 
2016
Series/Report no.: 
Economics Working Paper Series No. 13/176
Version Description: 
March 2016
Publisher: 
ETH Zurich, CER-ETH - Center of Economic Research, Zurich
Abstract: 
In credence goods markets, experts have better information about the appropriate quality of treatment than their customers. As experts provide both diagnosis and treatment, this leaves scope for fraud. We experimentally investigate how intensity of price competition and the level of customer information about past expert behavior influence an expert’s incentive to defraud his customers when the expert can build up reputation. We show that the level of fraud is significantly higher under price competition than when prices are fixed. The price decline under competitive prices superimposes quality competition. More customer information does not necessarily decrease the level of fraud.
Subjects: 
Credence good
Expert
Fraud
Price competition
Reputation
Overcharging
Undertreatment
JEL: 
D82
L15
Document Type: 
Working Paper

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