IDEAS home Printed from https://ideas.repec.org/p/iza/izadps/dp5700.html
   My bibliography  Save this paper

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

Author

Listed:
  • Balafoutas, Loukas

    (University of Innsbruck)

  • Beck, Adrian

    (University of Innsbruck)

  • Kerschbamer, Rudolf

    (University of Innsbruck)

  • Sutter, Matthias

    (Max Planck Institute for Research on Collective Goods)

Abstract

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.

Suggested Citation

  • Balafoutas, Loukas & Beck, Adrian & Kerschbamer, Rudolf & Sutter, Matthias, 2011. "What Drives Taxi Drivers? A Field Experiment on Fraud in a Market for Credence Goods," IZA Discussion Papers 5700, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp5700
    as

    Download full text from publisher

    File URL: https://docs.iza.org/dp5700.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Charness, Gary & Rabin, Matthew, 2001. "Understanding Social Preferences with Simple Tests," Department of Economics, Working Paper Series qt4qz9k8vg, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    2. Colin Camerer & Linda Babcock & George Loewenstein & Richard Thaler, 1997. "Labor Supply of New York City Cabdrivers: One Day at a Time," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(2), pages 407-441.
    3. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory of Fairness, Competition, and Cooperation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(3), pages 817-868.
    4. 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," American Economic Review, American Economic Association, vol. 96(2), pages 212-216, May.
    5. James C. Cox & Daniel Friedman & Vjollca Sadiraj, 2008. "Revealed Altruism," Econometrica, Econometric Society, vol. 76(1), pages 31-69, January.
    6. Vincent P. Crawford & Juanjuan Meng, 2011. "New York City Cab Drivers' Labor Supply Revisited: Reference-Dependent Preferences with Rational-Expectations Targets for Hours and Income," American Economic Review, American Economic Association, vol. 101(5), pages 1912-1932, August.
    7. Glenn W. Harrison & John A. List, 2004. "Field Experiments," Journal of Economic Literature, American Economic Association, vol. 42(4), pages 1009-1055, December.
    8. Uri Gneezy, 2005. "Deception: The Role of Consequences," American Economic Review, American Economic Association, vol. 95(1), pages 384-394, March.
    9. List John A., 2007. "Field Experiments: A Bridge between Lab and Naturally Occurring Data," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 6(2), pages 1-47, April.
    10. 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, Universität Innsbruck.
    11. Asher Wolinsky, 1993. "Competition in a Market for Informed Experts' Services," RAND Journal of Economics, The RAND Corporation, vol. 24(3), pages 380-398, Autumn.
    12. 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, September.
    13. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
    14. Toshiaki Iizuka, 2007. "Experts' agency problems: evidence from the prescription drug market in Japan," RAND Journal of Economics, RAND Corporation, vol. 38(3), pages 844-862, September.
    15. 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.
    16. Charness, Gary B & Rabin, Matthew, 2001. "Understanding Social Preferences With Simple Tests," University of California at Santa Barbara, Economics Working Paper Series qt0dc3k4m5, Department of Economics, UC Santa Barbara.
    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.
    18. 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.
    19. Charness, Gary & Rabin, Matthew, 2002. "Understanding Social Preferences with Simple Tests," Department of Economics, Working Paper Series qt3d04q5sm, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    20. Henry S. Farber, 2008. "Reference-Dependent Preferences and Labor Supply: The Case of New York City Taxi Drivers," American Economic Review, American Economic Association, vol. 98(3), pages 1069-1082, June.
    21. Gary Charness & Matthew Rabin, 2002. "Understanding Social Preferences with Simple Tests," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(3), pages 817-869.
    22. Kerschbamer, Rudolf & Sutter, Matthias & Dulleck, Uwe, 2009. "The Impact of Distributional Preferences on (Experimental) Markets for Expert Services," IZA Discussion Papers 4647, Institute of Labor Economics (IZA).
    23. Uwe Dulleck & Rudolf Kerschbamer & Matthias Sutter, 2011. "The Economics of Credence Goods: An Experiment on the Role of Liability, Verifiability, Reputation, and Competition," American Economic Review, American Economic Association, vol. 101(2), pages 526-555, April.
    24. Henry S. Farber, 2005. "Is Tomorrow Another Day? The Labor Supply of New York City Cabdrivers," Journal of Political Economy, University of Chicago Press, vol. 113(1), pages 46-82, February.
    25. Friedman, Daniel & Sadiraj, Vjollca & Cox, James C., 2008. "Revealed altruism," Santa Cruz Department of Economics, Working Paper Series qt9jr3v93s, Department of Economics, UC Santa Cruz.
    26. Ernst Fehr & Helen Bernhard & Bettina Rockenbach, 2008. "Egalitarianism in young children," Nature, Nature, vol. 454(7208), pages 1079-1083, August.
    27. James Andreoni & John Miller, 2002. "Giving According to GARP: An Experimental Test of the Consistency of Preferences for Altruism," Econometrica, Econometric Society, vol. 70(2), pages 737-753, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dominik Erharter, 2012. "Credence goods markets, distributional preferences and the role of institutions," Working Papers 2012-11, Faculty of Economics and Statistics, Universität Innsbruck.
    2. Charness, Gary & Kuhn, Peter, 2011. "Lab Labor: What Can Labor Economists Learn from the Lab?," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 3, pages 229-330, Elsevier.
    3. Kandul, Serhiy & Lanz, Bruno & Reins, Evert, 2023. "Reciprocity and gift exchange in markets for credence goods," Games and Economic Behavior, Elsevier, vol. 141(C), pages 52-69.
    4. Morita, Hodaka & Servátka, Maroš, 2013. "Group identity and relation-specific investment: An experimental investigation," European Economic Review, Elsevier, vol. 58(C), pages 95-109.
    5. Eckel, Catherine & Gintis, Herbert, 2010. "Blaming the messenger: Notes on the current state of experimental economics," Journal of Economic Behavior & Organization, Elsevier, vol. 73(1), pages 109-119, January.
    6. Daniel Woods & Maroš Servátka, 2019. "Nice to you, nicer to me: Does self-serving generosity diminish the reciprocal response?," Experimental Economics, Springer;Economic Science Association, vol. 22(2), pages 506-529, June.
    7. Loukas Balafoutas & Rudolf Kerschbamer & Matthias Sutter, 2017. "Second‐Degree Moral Hazard In A Real‐World Credence Goods Market," Economic Journal, Royal Economic Society, vol. 127(599), pages 1-18, February.
    8. Bart J. Wilson, 2012. "Contra Private Fairness," American Journal of Economics and Sociology, Wiley Blackwell, vol. 71(2), pages 407-435, April.
    9. Fudenberg, Drew & Levine, David K., 2012. "Fairness, risk preferences and independence: Impossibility theorems," Journal of Economic Behavior & Organization, Elsevier, vol. 81(2), pages 606-612.
    10. Nicklisch, Andreas & Wolff, Irenaeus, 2012. "On the nature of reciprocity: Evidence from the ultimatum reciprocity measure," Journal of Economic Behavior & Organization, Elsevier, vol. 84(3), pages 892-905.
    11. Cox, James C., 2010. "Some issues of methods, theories, and experimental designs," Journal of Economic Behavior & Organization, Elsevier, vol. 73(1), pages 24-28, January.
    12. Roman Inderst & Kiryl Khalmetski & Axel Ockenfels, 2019. "Sharing Guilt: How Better Access to Information May Backfire," Management Science, INFORMS, vol. 65(7), pages 3322-3336, July.
    13. Giovanni Di Bartolomeo & Stefano Papa, 2019. "The Effects of Physical Activity on Social Interactions: The Case of Trust and Trustworthiness," Journal of Sports Economics, , vol. 20(1), pages 50-71, January.
    14. Mimra, Wanda & Rasch, Alexander & Waibel, Christian, 2016. "Second opinions in markets for expert services: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 131(PB), pages 106-125.
    15. Eduard Marinov, 2017. "The 2017 Nobel Prize in Economics," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 6, pages 117-159.
    16. Kerschbamer, Rudolf, 2015. "The geometry of distributional preferences and a non-parametric identification approach: The Equality Equivalence Test," European Economic Review, Elsevier, vol. 76(C), pages 85-103.
    17. 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, Universität Innsbruck.
    18. James C Cox & Danyang Li, 2012. "Do I care if you know I betrayed you?," Economics Bulletin, AccessEcon, vol. 32(4), pages 2839-2848.
    19. Polonio, Luca & Coricelli, Giorgio, 2019. "Testing the level of consistency between choices and beliefs in games using eye-tracking," Games and Economic Behavior, Elsevier, vol. 113(C), pages 566-586.
    20. Dhaene, Geert & Bouckaert, Jan, 2010. "Sequential reciprocity in two-player, two-stage games: An experimental analysis," Games and Economic Behavior, Elsevier, vol. 70(2), pages 289-303, November.

    More about this item

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp5700. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Holger Hinte (email available below). General contact details of provider: https://edirc.repec.org/data/izaaade.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.