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Guilt from Promise-Breaking and Trust in Markets for Expert Services – Theory and Experiment

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Author Info

  • Beck, Adrian

    (Department of Economics, University of Innsbruck)

  • Kerschbamer, Rudolf

    (Department of Economics, University of Innsbruck)

  • Qiu, Jianying

    (Department of Economics, University of Innsbruck)

  • Sutter, Matthias

    ()
    (Department of Economics, School of Business, Economics and Law, Göteborg University)

Abstract

We examine the influence of guilt and trust on the performance of credence goods markets. An expert can make a promise to a consumer first, whereupon the consumer can express her trust by paying an interaction price before the expert's provision and charging decisions. We argue that the expert's promise induces a commitment that triggers guilt if the promise is broken, and guilt is exacerbated by higher interaction prices. An experiment qualitatively confirms our predictions: (1) most experts make the predicted promise; (2) proper promises induce consumer-friendly behavior; and (3) higher interaction prices increase the commitment value of proper promises.

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File URL: http://hdl.handle.net/2077/22132
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Bibliographic Info

Paper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 436.

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Length: 49 pages
Date of creation: 17 Mar 2010
Date of revision:
Handle: RePEc:hhs:gunwpe:0436

Contact details of provider:
Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
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Related research

Keywords: Promises; Guilt; Trust; Credence Goods; Experts; Reciprocity;

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  1. Ernst Fehr, 2008. "On the Economics and Biology of Trust," SOEPpapers on Multidisciplinary Panel Data Research 154, DIW Berlin, The German Socio-Economic Panel (SOEP).
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  8. Charness, Gary B & Dufwenberg, Martin, 2006. "Promises & Partnership," University of California at Santa Barbara, Economics Working Paper Series qt0127h86v, Department of Economics, UC Santa Barbara.
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  18. Charness, Gary B & Dufwenberg, Martin, 2008. "Broken Promises: An Experiment," University of California at Santa Barbara, Economics Working Paper Series qt6836m74q, Department of Economics, UC Santa Barbara.
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Cited by:
  1. Cary Deck & Maroš Servátka & Steven Tucker, 2013. "An examination of the effect of messages on cooperation under double-blind and single-blind payoff procedures," Experimental Economics, Springer, vol. 16(4), pages 597-607, December.
  2. Beck, Adrian & Kerschbamer, Rudolf & Qiu, Jianying & Sutter, Matthias, 2013. "Shaping beliefs in experimental markets for expert services: Guilt aversion and the impact of promises and money-burning options," Games and Economic Behavior, Elsevier, vol. 81(C), pages 145-164.

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