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Reputation vs Selection Effects in Markets with Informational Asymmetries

Author

Listed:
  • Theodore Alysandratos

    (Heidelberg University)

  • Sotiris Georganas

    (City-University of London)

  • Matthias Sutter

    (Max Planck Institute for Research on Collective Goods, University of Cologne, University of Innsbruck, and IZA Bonn)

Abstract

In markets with asymmetric information between sellers and buyers, feedback mechanisms are important to increase market efficiency and reduce the informational disadvantage of buyers. Feedback mechanisms might work because of self-selection of more trustworthy sellers into markets with such mechanisms or because of reputational concerns of sellers. In our field experiment, we can disentangle self-selection from reputation effects. Based on 476 taxi rides with four different types of taxis, we can show strong reputation effects on the prices and service quality of drivers, while there is practically no evidence of a self-selection effect. We discuss policy implications of our findings.

Suggested Citation

  • Theodore Alysandratos & Sotiris Georganas & Matthias Sutter, 2022. "Reputation vs Selection Effects in Markets with Informational Asymmetries," ECONtribute Discussion Papers Series 205, University of Bonn and University of Cologne, Germany.
    • Handle: RePEc:ajk:ajkdps:205
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    References listed on IDEAS

    as
    1. Matthias Wibral, 2015. "Identity changes and the efficiency of reputation systems," Experimental Economics, Springer;Economic Science Association, vol. 18(3), pages 408-431, September.
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    More about this item

    Keywords

    information asymmetries; reputation mechanisms; selection effects; credence goods; field experiment;
    All these keywords.

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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