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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 behavior by sellers. This paper presents the results of 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. Results reveal that taxi drivers cheat passengers in systematic ways: Passengers with inferior information about optimal routes are taken on longer detours while asymmetric information on the local tariff system leads to manipulated bills. Higher income seems to lead to more fraud.

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File URL: http://eeecon.uibk.ac.at/wopec2/repec/inn/wpaper/2011-11.pdf
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Bibliographic Info

Paper provided by Faculty of Economics and Statistics, University of Innsbruck in its series Working Papers with number 2011-11.

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Length: 47
Date of creation: Apr 2011
Date of revision:
Handle: RePEc:inn:wpaper:2011-11

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Keywords: Credence goods; expert services; natural field experiment; taxi rides; fraud; asymmetric information;

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  1. John List & David Reiley, 2008. "Field experiments," Artefactual Field Experiments 00091, The Field Experiments Website.
  2. Darby, Michael R & Karni, Edi, 1973. "Free Competition and the Optimal Amount of Fraud," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 67-88, April.
  3. 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, vol. 96(2), pages 212-216, May.
  4. repec:aea:jeclit:v:44:y:2006:i:1:p:5-42 is not listed on IDEAS
  5. Gary Charness & Luca Rigotti & Aldo Rustichini, 2007. "Individual Behavior and Group Membership," American Economic Review, American Economic Association, vol. 97(4), pages 1340-1352, September.
  6. James C. Cox & Daniel Friedman & Vjollca Sadiraj, 2008. "Revealed Altruism," Econometrica, Econometric Society, vol. 76(1), pages 31-69, 01.
  7. Vincent P Crawford & Juanjuan Meng, 2008. "New York City Cabdrivers’ Labor Supply Revisited: Reference-Dependent Preferences with Rational-Expectations Targets for Hours and Income," Levine's Working Paper Archive 122247000000002281, David K. Levine.
  8. John List, 2006. "Field experiments: A bridge between lab and naturally occurring data," Artefactual Field Experiments 00083, The Field Experiments Website.
  9. Dulleck, Uwe & Rudolf, Kerschbamer & Matthias, Sutter, 2009. "The Economics of Credence Goods: On the Role of Liability, Verifiability, Reputation and Competition," Working Papers in Economics 348, University of Gothenburg, Department of Economics.
  10. Rudolf Kerschbamer & Matthias Sutter & Uwe Dulleck, 2009. "The Impact of Distributional Preferences on (Experimental) Markets for Expert Services," Working Papers 2009-28, Faculty of Economics and Statistics, University of Innsbruck.
  11. Henry S. Schneider, 2012. "Agency Problems and Reputation in Expert Services: Evidence from Auto Repair," Journal of Industrial Economics, Wiley Blackwell, vol. 60(3), pages 406-433, 09.
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