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

Author

Listed:
  • 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).

Suggested Citation

  • 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.
  • Handle: RePEc:eee:gamebe:v:81:y:2013:i:c:p:145-164
    DOI: 10.1016/j.geb.2013.05.002
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Uwe Dulleck & Rudolf Kerschbamer & Alexander Konovalov, 2014. "Too much or too little? Price-discrimination in a market for credence goods," Working Papers 2014-13, Faculty of Economics and Statistics, University of Innsbruck.
    2. repec:eee:gamebe:v:106:y:2017:i:c:p:161-178 is not listed on IDEAS
    3. Huck, Steffen & Lünser, Gabriele & Spitzer, Florian & Tyran, Jean-Robert, 2016. "Medical insurance and free choice of physician shape patient overtreatment: A laboratory experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 131(PB), pages 78-105.
    4. Beck, Adrian & Kerschbamer, Rudolf & Qiu, Jianying & Sutter, Matthias, 2014. "Car mechanics in the lab––Investigating the behavior of real experts on experimental markets for credence goods," Journal of Economic Behavior & Organization, Elsevier, vol. 108(C), pages 166-173.
    5. Shoji, Masahiro, 2017. "Eliciting Guilt Sensitivity to Predict Real-World Behavior," MPRA Paper 81451, University Library of Munich, Germany.
    6. Khalmetski, Kiryl, 2016. "Testing guilt aversion with an exogenous shift in beliefs," Games and Economic Behavior, Elsevier, vol. 97(C), pages 110-119.
    7. Khalmetski, Kiryl & Rockenbach, Bettina & Werner, Peter, 2017. "Evasive Lying in Strategic Communication," Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168119, Verein für Socialpolitik / German Economic Association.
    8. Vera Angelova & Tobias Regner, 2016. "Can a Bonus Overcome Moral Hazard? An Experiment on Voluntary Payments, Competition, and Reputation in Markets for Expert Services," SFB 649 Discussion Papers SFB649DP2016-027, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    9. Loukas Balafoutas & Adrian Beck & Rudolf Kerschbamer & Matthias Sutter, 2014. "The Hidden Costs of Tax Evasion - Collaborative Tax Evasion in Markets for Expert Services," Working Papers 2014-01, Faculty of Economics and Statistics, University of Innsbruck.
    10. Ederer, Florian & Stremitzer, Alexander, 2017. "Promises and expectations," Games and Economic Behavior, Elsevier, vol. 106(C), pages 161-178.
    11. Balafoutas, Loukas & Beck, Adrian & Kerschbamer, Rudolf & Sutter, Matthias, 2015. "The hidden costs of tax evasion," Journal of Public Economics, Elsevier, vol. 129(C), pages 14-25.
    12. Ouyang, Yaofu, 2016. "Credence Goods, Risk Averse, and Optimal Insurance," MPRA Paper 70392, University Library of Munich, Germany.
    13. Masahiro Shoji, 2014. "Channels of Peer Effects and Guilt Aversion in Crime: Experimental and Empirical Evidence from Bangladesh," CIRJE F-Series CIRJE-F-923, CIRJE, Faculty of Economics, University of Tokyo.
    14. Khalmetski, Kiryl & Ockenfels, Axel & Werner, Peter, 2015. "Surprising gifts: Theory and laboratory evidence," Journal of Economic Theory, Elsevier, vol. 159(PA), pages 163-208.
    15. repec:eee:pubeco:v:156:y:2017:i:c:p:59-72 is not listed on IDEAS
    16. Loukas Balafoutas & Helena Fornwagner, 2016. "The limits of guilt," Working Papers 2016-09, Faculty of Economics and Statistics, University of Innsbruck.
    17. David Ong & Chun-Lei Yang, 2014. "Pro Bono Work and Trust in Expert Fields," CESifo Working Paper Series 4897, CESifo Group Munich.
    18. Eric Cardella, 2016. "Exploiting the guilt aversion of others: do agents do it and is it effective?," Theory and Decision, Springer, vol. 80(4), pages 523-560, April.

    More about this item

    Keywords

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

    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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