What drives fraud in a credence goods market? Evidence from a field study
AbstractThis paper investigates the impact of four key economic variables on an expert firm’s incentive to defraud its customers in a credence goods market: the level of competition, the expert firm’s financial situation, its competence, and its reputational concerns. We use and complement the dataset of a nationwide field study conducted by the German Automobile Association that regularly checks the reliability of garages in Germany. We find that more intense competition and high competence lower firms’ incentive to overcharge. A low concern for reputation and a critical financial situation increase the incentive to overcharge.
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Bibliographic InfoPaper provided by CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich in its series CER-ETH Economics working paper series with number 13/179.
Length: 40 pages
Date of creation: May 2013
Date of revision:
Asymmetric information; Auto repair market; Credence goods; Expert; Fraud; Overcharging.;
Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-05-19 (All new papers)
- NEP-COM-2013-05-19 (Industrial Competition)
- NEP-CTA-2013-05-19 (Contract Theory & Applications)
- NEP-EUR-2013-05-19 (Microeconomic European Issues)
- NEP-HME-2013-05-19 (Heterodox Microeconomics)
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