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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 behavior by sellers. This paper presents the results of 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. Results reveal that taxi drivers cheat passengers in systematic ways: Passengers with inferior information about optimal routes are taken on longer detours while asymmetric information on the local tariff system leads to manipulated bills. Higher income seems to lead to more fraud.

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Paper provided by Faculty of Economics and Statistics, University of Innsbruck in its series Working Papers with number 2011-11.

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Length: 47
Date of creation: Apr 2011
Date of revision:
Handle: RePEc:inn:wpaper:2011-11
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  1. Uwe Dulleck & Rudolf Kerschbamer & Matthias Sutter, 2009. "The Economics of Credence Goods: On the Role of Liability, Verifiability, Reputation and Competition," Working Papers 2009-03, Faculty of Economics and Statistics, University of Innsbruck.
  2. Cox, James C. & Friedman, Daniel & Sadiraj, Vjollca, 2009. "Revealed Altruism," Santa Cruz Department of Economics, Working Paper Series qt6rb5t4mc, Department of Economics, UC Santa Cruz.
  3. 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.
  4. 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.
  5. Glenn Harrison & John List, 2004. "Field experiments," Artefactual Field Experiments 00058, The Field Experiments Website.
  6. 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.
  7. Vincent P Crawford & Juanjuan Meng, 2008. "New York City Cabdrivers’ Labor Supply Revisited: Reference-Dependent Preferences with Rational-Expectations Targets for Hours and Income," Levine's Working Paper Archive 122247000000002281, David K. Levine.
  8. 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.
  9. John A. List, 2007. "Field Experiments: A Bridge Between Lab and Naturally-Occurring Data," NBER Working Papers 12992, National Bureau of Economic Research, Inc.
  10. 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.
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