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What Drives Taxi Drivers? A Field Experiment on Fraud in a Market for Credence Goods

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  • Loukas Balafoutas
  • Adrian Beck
  • Rudolf Kerschbamer
  • Matthias Sutter

Abstract

Credence goods are characterized by informational asymmetries between sellers and consumers that invite fraudulent behaviour by sellers. This article presents a natural field experiment on taxi rides in Athens, Greece, set up to measure different types of fraud and to examine the influence of passengers' presumed information and income on the extent of fraud. We find that passengers with inferior information about optimal routes are taken on significantly longer detours, while lack of information on the local tariff system increases the likelihood of manipulated bills by about fifteen percentage points. Passengers' perceived income seems to have no effect on fraud. Copyright 2013, Oxford University Press.

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Bibliographic Info

Article provided by Oxford University Press in its journal Review of Economic Studies.

Volume (Year): 80 (2013)
Issue (Month): 3 ()
Pages: 876-891

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Handle: RePEc:oup:restud:v:80:y:2013:i:3:p:876-891

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  1. Lorenz Goette & David Huffman & Stephan Meier, 2006. "The Impact of Group Membership on Cooperation and Norm Enforcement: Evidence Using Random Assignment to Real Social Groups," American Economic Review, American Economic Association, American Economic Association, vol. 96(2), pages 212-216, May.
  2. Dulleck, Uwe & Kerschbamer, Rudolf & Sutter, Matthias, 2009. "The Economics of Credence Goods: On the Role of Liability, Verifiability, Reputation and Competition," IZA Discussion Papers 4030, Institute for the Study of Labor (IZA).
  3. Gary Charness & Luca Rigotti & Aldo Rustichini, 2007. "Individual Behavior and Group Membership," American Economic Review, American Economic Association, American Economic Association, vol. 97(4), pages 1340-1352, September.
  4. Vincent P. Crawford & Juanjuan Meng, 2011. "New York City Cab Drivers' Labor Supply Revisited: Reference-Dependent Preferences with Rational-Expectations Targets for Hours and Income," American Economic Review, American Economic Association, American Economic Association, vol. 101(5), pages 1912-32, August.
  5. Kerschbamer, Rudolf & Sutter, Matthias & Dulleck, Uwe, 2009. "The Impact of Distributional Preferences on (Experimental) Markets for Expert Services," IZA Discussion Papers 4647, Institute for the Study of Labor (IZA).
  6. Henry S. Schneider, 2012. "Agency Problems and Reputation in Expert Services: Evidence from Auto Repair," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 60(3), pages 406-433, 09.
  7. List John A., 2007. "Field Experiments: A Bridge between Lab and Naturally Occurring Data," The B.E. Journal of Economic Analysis & Policy, De Gruyter, De Gruyter, vol. 5(2), pages 1-47, April.
  8. Darby, Michael R & Karni, Edi, 1973. "Free Competition and the Optimal Amount of Fraud," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 16(1), pages 67-88, April.
  9. Glenn W. Harrison & John A. List, 2004. "Field Experiments," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 42(4), pages 1009-1055, December.
  10. James C. Cox & Daniel Friedman & Vjollca Sadiraj, . "Revealed Altruism," Experimental Economics Center Working Paper Series, Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University 2006-09, Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University, revised Jul 2007.
  11. Crawford, Vincent P. & Meng, Juanjuan, 2008. "New York City Cabdrivers' Labor Supply Revisited: Reference-Dependence Preferences with Rational-Expectations Targets for Hours and Income," University of California at San Diego, Economics Working Paper Series, Department of Economics, UC San Diego qt94w5n6j9, Department of Economics, UC San Diego.
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Cited by:
  1. Adrian Beck & Rudolf Kerschbamer & Jianying Qiu, & Matthias Sutter, 2009. "Car Mechanics in the Lab - Investigating the Behavior of Real Experts on Experimental Markets for Credence Goods," Working Papers, Faculty of Economics and Statistics, University of Innsbruck 2009-27, Faculty of Economics and Statistics, University of Innsbruck.
  2. Mujcic, Redzo & Frijters, Paul, 2013. "Still Not Allowed on the Bus: It Matters If You're Black or White!," IZA Discussion Papers 7300, Institute for the Study of Labor (IZA).
  3. Bengtsson, Niklas, 2011. "Regulation Failure and CO2-emissions: An Experimental Investigation of the Cape Town Taxi Market," Working Paper Series, Center for Labor Studies, Uppsala University, Department of Economics 2011:13, Uppsala University, Department of Economics, revised 12 Aug 2013.
  4. Loukas Balafoutas & Rudolf Kerschbamer & Matthias Sutter, 2013. "Second-Degree Moral Hazard in a Real-World Credence Goods Market," Economics Working Papers, European University Institute ECO2013/08, European University Institute.
  5. Marco Castillo & Ragan Petrie & Máximo Torero & Lise Vesterlund, 2012. "Gender Differences in Bargaining Outcomes: A Field Experiment on Discrimination," NBER Working Papers 18093, National Bureau of Economic Research, Inc.
  6. Dulleck, Uwe & Kerschbamer, Rudolf & Konovalov, Alexander, 2014. "Too Much or Too Little? Price-Discrimination in a Market for Credence Goods," Working Papers in Economics, University of Gothenburg, Department of Economics 582, University of Gothenburg, Department of Economics, revised Apr 2014.
  7. Maarten Janssen & Alexei Parakhonyak, 2011. "Sårvice Refusal in Regulated Markets for Credence Goods," HSE Working papers, National Research University Higher School of Economics WP BRP 08/EC/2011, National Research University Higher School of Economics.
  8. Uwe Dulleck & David Johnston & Rudolf Kerschbamer & Matthias Sutter, 2012. "The good, the bad and the naive: Do fair prices signal good types or do they induce good behaviour?," Working Papers, Faculty of Economics and Statistics, University of Innsbruck 2012-03, Faculty of Economics and Statistics, University of Innsbruck.
  9. Alexander Rasch & Christian Waibel, 2013. "What drives fraud in a credence goods market? Evidence from a field study," CER-ETH Economics working paper series, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich 13/179, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  10. repec:cgr:cgsser:03-07 is not listed on IDEAS

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