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What Drives Taxi Drivers? A Field Experiment on Fraud in a Market for Credence Goods

  • Loukas Balafoutas
  • Adrian Beck
  • Rudolf Kerschbamer
  • Matthias Sutter

Credence goods are characterized by informational asymmetries between sellers and consumers that invite fraudulent behaviour by sellers. This article presents 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. We find that passengers with inferior information about optimal routes are taken on significantly longer detours, while lack of information on the local tariff system increases the likelihood of manipulated bills by about fifteen percentage points. Passengers' perceived income seems to have no effect on fraud. Copyright 2013, Oxford University Press.

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Article provided by Oxford University Press in its journal Review of Economic Studies.

Volume (Year): 80 (2013)
Issue (Month): 3 ()
Pages: 876-891

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Handle: RePEc:oup:restud:v:80:y:2013:i:3:p:876-891
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  1. 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," Working Papers 06-7, Federal Reserve Bank of Boston.
  2. Uwe Dulleck & Rudolf Kerschbamer & Matthias Sutter, 2009. "The Economics of Credence Goods: On the Role of Liability, Verifiability, Reputation and Competition," NCER Working Paper Series 42, National Centre for Econometric Research.
  3. 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.
  4. John List, 2006. "Field experiments: A bridge between lab and naturally occurring data," Artefactual Field Experiments 00083, The Field Experiments Website.
  5. David Reiley & John List, 2008. "Field experiments," Artefactual Field Experiments 00091, The Field Experiments Website.
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  7. 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.
  8. Jim C. Cox & Daniel Friedman & Vjollca Sadiraj, 2005. "Revealed Altruism," Levine's Bibliography 784828000000000595, UCLA Department of Economics.
  9. 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.
  10. 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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