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Guilt from Promise-Breaking and Trust in Markets for Expert Services - Theory and Experiment

  • Adrian Beck

    ()

  • Rudolf Kerschbamer

    ()

  • Jianying Qiu

    ()

  • Matthias Sutter

    ()

We examine the influence of guilt and trust on the performance of credence goods markets. An expert can make a promise to a consumer first, whereupon the consumer can express her trust by paying an interaction price before the expert's provision and charging decisions. We argue that the expert's promise induces a commitment that triggers guilt if the promise is broken, and guilt is exacerbated by higher interaction prices. An experiment qualitatively confirms our predictions: (1) most experts make the predicted promise; (2) proper promises induce consumer-friendly behavior; and (3) higher interaction prices increase the commitment value of proper promises.

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Paper provided by Faculty of Economics and Statistics, University of Innsbruck in its series Working Papers with number 2010-06.

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Length: 55
Date of creation: Mar 2010
Date of revision:
Handle: RePEc:inn:wpaper:2010-06
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  1. Fehr, Ernst & Schmidt, Klaus M., 1999. "A theory of fairness, competition, and cooperation," Munich Reprints in Economics 20650, University of Munich, Department of Economics.
  2. In-Koo Cho & David M. Kreps, 1997. "Signaling Games and Stable Equilibria," Levine's Working Paper Archive 896, David K. Levine.
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  16. Steffen Huck & Gabriele K. Ruchala & Jean-Robert Tyran, 2006. "Competition Fosters Trust," Discussion Papers 06-22, University of Copenhagen. Department of Economics.
  17. Greiner, Ben, 2004. "An Online Recruitment System for Economic Experiments," MPRA Paper 13513, University Library of Munich, Germany.
  18. Charness, Gary B & Dufwenberg, Martin, 2006. "Promises & Partnership," University of California at Santa Barbara, Economics Working Paper Series qt0127h86v, Department of Economics, UC Santa Barbara.
  19. 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.
  20. Uri Gneezy, 2005. "Deception: The Role of Consequences," American Economic Review, American Economic Association, vol. 95(1), pages 384-394, March.
  21. Charness, Gary B & Dufwenberg, Martin, 2008. "Broken Promises: An Experiment," University of California at Santa Barbara, Economics Working Paper Series qt6836m74q, Department of Economics, UC Santa Barbara.
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