09:15 - 11:00
Parallel track
Room: Sterrenkamer
Are two heads better than one? Second opinions in a credence goods field experiment
Parampreet C. Bindra 1, Rudolf Kerschbamer 1, Daniel Neururer 1, Matthias Sutter 1, 2, 3
1 University of Innsbruck, Innsbruck
2 Max Planck Institute for Research into Collective Goods, Bonn
3 University of Cologne, Cologne

Honesty can be seen as one fundamental buttress for cooperation and for economic welfare. However, market participants do not always act in an honest way. Using a natural field experiment with computer repair shops in Germany we are examining possible effects of seeking a second opinion in this credence goods market. Due to their information asymmetry, the computer mechanics have monetary incentives to defraud their customers. Our data shows evidence for a significant rise of prices when confronting the expert with an incorrect second opinion. This rise is due to an increase in the frequency of overprovision, as well as heightened prices for spare parts and working time once the expert learns the customer has already been to another shop. However, confronting the expert with a correct second opinion increases underprovision behavior, as the experts may form beliefs about the customer, and think that he is tough to serve and therefore reject him. Further the signalled information induces a higher risk for the expert to be caught overcharging or overtreating.


Reference:
Sa-Risk and uncertainty-2
Session:
Risk and uncertainty
Presenter/s:
Parampreet C. Bindra
Room:
Sterrenkamer
Date:
Saturday, 4 May
Time:
09:15 - 11:00
Session times:
09:15 - 11:00