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Shaping beliefs in experimental markets for expert services: Guilt aversion and the impact of promises and money-burning options

Author Info

Listed author(s):
  • Beck, Adrian
  • Kerschbamer, Rudolf
  • Qiu, Jianying
  • Sutter, Matthias

Abstract

In a credence goods game with an expert and a consumer, we study experimentally the impact of two devices that are predicted to induce consumer-friendly behavior if the expert has a propensity to feel guilty when he believes that he violates the consumerʼs payoff expectations: (i) an opportunity for the expert to make a non-binding promise; and (ii) an opportunity for the consumer to burn money. In belief-based guilt aversion theory the first opportunity shapes an expertʼs behavior if an appropriate promise is made and if it is expected to be believed by the consumer; by contrast, the second opportunity might change behavior even though this option is never used along the predicted path. Experimental results confirm the behavioral relevance of (i) but fail to confirm (ii).

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File URL: http://www.sciencedirect.com/science/article/pii/S0899825613000754
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Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 81 (2013)
Issue (Month): C ()
Pages: 145-164

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Handle: RePEc:eee:gamebe:v:81:y:2013:i:c:p:145-164
DOI: 10.1016/j.geb.2013.05.002
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622836

Keywords: Credence goods; Belief-dependent preferences; Guilt aversion; Promises; Money burning; Psychological forward induction; Experiments;

Find related papers by JEL classification:

  • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
  • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
  • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
  • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
  • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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