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The Good, the Bad and the Naive: Do fair prices signal good types or do they induce good behaviour?


  • Uwe Dulleck

    () (QUT)

  • David Johnston

    () (Monash University)

  • Rudolf Kerschbamer

    () (University of Innsbruck)

  • Matthias Sutter

    () (University of Gothenburg)


Evidence on behavior of experts in credence goods markets raises an important causality issue: Do "fair prices" induce "good behavior", or do "good experts" post "fair prices"? To answer this question we propose and test a model with three seller types: "the good" choose fair prices and behave consumer-friendly; "the bad" mimic the good types' price-setting, but cheat on quality; and "the naive" fall victim to a projection bias that all sellers behave like the bad types. OLS, sample selection and fixed effects regressions support the model's predictions and show that causality goes from good experts to fair prices.

Suggested Citation

  • Uwe Dulleck & David Johnston & Rudolf Kerschbamer & Matthias Sutter, 2012. "The Good, the Bad and the Naive: Do fair prices signal good types or do they induce good behaviour?," NCER Working Paper Series 81, National Centre for Econometric Research.
  • Handle: RePEc:qut:auncer:2012_4

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    References listed on IDEAS

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    Cited by:

    1. Bartke, Stephan, 2015. "The economic role of valuers in real property markets," UFZ Discussion Papers 13/2015, Helmholtz Centre for Environmental Research (UFZ), Division of Social Sciences (ÖKUS).
    2. Mimra, Wanda & Rasch, Alexander & Waibel, Christian, 2016. "Price competition and reputation in credence goods markets: Experimental evidence," Games and Economic Behavior, Elsevier, vol. 100(C), pages 337-352.

    More about this item


    Credence Goods; Experts; Pricing;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General

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