determinants for efficiency in credence goods markets. While theory predicts that either liability or verifiability yields … efficiency, we find that liability has a crucial, but verifiability only a minor effect. Allowing sellers to build up reputation … higher efficiency as long as liability is violated. -- Credence goods ; experiment ; liability ; verifiability ; reputation …

. Under unlimited liability, the principal strictly benefits from a gap by partially insuring the agents and thereby reducing … labor costs. If the agents are protected by limited liability, the principal sticks to the standard tournament. …