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

  • Beck, Adrian

    ()

    (University of Innsbruck)

  • Kerschbamer, Rudolf

    ()

    (University of Innsbruck)

  • Qiu, Jianying

    ()

    (University of Innsbruck)

  • Sutter, Matthias

    ()

    (University of Cologne)

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 Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4827.

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Length: 50 pages
Date of creation: Mar 2010
Date of revision:
Handle: RePEc:iza:izadps:dp4827
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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. Steffen Huck & Gabriele K. Ruchala & Jean-Robert Tyran, 2006. "Competition Fosters Trust," Discussion Papers 06-22, University of Copenhagen. Department of Economics.
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  9. Greiner, Ben, 2004. "An Online Recruitment System for Economic Experiments," MPRA Paper 13513, University Library of Munich, Germany.
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  11. Charness, Gary & Dufwenberg, Martin, 2003. "Promises & Partnership," Research Papers in Economics 2003:3, Stockholm University, Department of Economics.
  12. 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.
  13. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
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  17. 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.
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  20. Berg Joyce & Dickhaut John & McCabe Kevin, 1995. "Trust, Reciprocity, and Social History," Games and Economic Behavior, Elsevier, vol. 10(1), pages 122-142, July.
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