This paper challenges recent results on the fragility of the value of commitment. It introduces a specific notion of the 'value of information' for a later-moving player about the action choice of a previously-moving player, gives conditions under which this value is positive and shows that a...

We compare the behavior of car mechanics and college students as sellers in experimental credence goods markets. Finding largely similar behavior, we note much more overtreatment by car mechanics, probably due to decision heuristics they learned in their professional training.

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...

Credence goods markets suffer from inefficiencies arising from informational asymmetries between expert sellers and customers. While standard theory predicts that inefficiencies disappear if customers can verify the quality received, verifiability fails to yield efficiency in experiments with...

Credence goods markets are characterized by asymmetric information between sellers and consumers that may give rise to inefficiencies, such as under- and overtreatment or market break-down. We study in a large experiment with 936 participants the determinants for efficiency in credence goods...

Credence goods markets suffer from inefficiencies caused by superior information of sellers about the surplus-maximizing quality. While standard theory predicts that equal mark-up prices solve the credence goods problem if customers can verify the quality received, experimental evidence...

We use a large and heterogeneous sample of the Danish population to investigate the importance of distributional preferences for behavior in a public good game and a trust game. We find robust evidence for the significant explanatory power of distributional preferences. In fact, compared to...

In an experiment we first elicit the distributional preferences of subjects and then let them bid for a lottery, either in a Becker-DeGroot-Marschak (BDM) mechanism or a Vickrey auction (VA). Standard theory predicts that altruistic subjects underbid in the VA - compared to the BDM - while...

Previous work has shown that unobservable random shocks on output have a detrimental effect on effort provision in short-term ('static') employment relationships. Given the prevalence of long-term ('dynamic') relationships in firms, we investigate whether the impact of shocks is similarly...

Credence goods markets - like for health care or repair services - with their informational asymmetries between sellers and customers are prone to fraudulent behavior of sellers and resulting market inefficiencies. We present the first model that considers both diagnostic uncertainty of sellers...