Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/283300 
Year of Publication: 
2023
Series/Report no.: 
ECONtribute Discussion Paper No. 258
Publisher: 
University of Bonn and University of Cologne, Reinhard Selten Institute (RSI), Bonn and Cologne
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.
Subjects: 
Credence goods
diagnostic uncertainty
insurance coverage
experiment
JEL: 
C91
D82
G22
Document Type: 
Working Paper

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