Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/73547
Authors: 
Dulleck, Uwe
Kerschbamer, Rudolf
Sutter, Matthias
Year of Publication: 
2009
Series/Report no.: 
Working Papers in Economics and Statistics 2009-03
Abstract: 
Credence goods markets are characterized by asymmetric information between sellers and consumers that may give rise to inefficiencies, such as under- and overtreatment or market break-down. We study in a large experiment with 936 participants the determinants for efficiency in credence goods markets. While theory predicts that either liability or verifiability yields efficiency, we find that liability has a crucial, but verifiability only a minor effect. Allowing sellers to build up reputation has little influence, as predicted. Seller competition drives down prices and yields maximal trade, but does not lead to higher efficiency as long as liability is violated.
Subjects: 
Credence goods
Experiment
Liability
Verifiability
Reputation
Competition
JEL: 
C72
C91
D40
D82
Document Type: 
Working Paper

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