Shaping beliefs in experimental markets for expert services: Guilt aversion and the impact of promises and money-burning options

Abstract

In a credence goods game with an expert and a consumer, we study experimentally the impact of two devices that are predicted to induce consumer-friendly behavior if the expert has a propensity to feel guilty when he believes that he violates the consumerʼs payoff expectations: (i) an opportunity for the expert to make a non-binding promise; and (ii) an opportunity for the consumer to burn money. In belief-based guilt aversion theory the first opportunity shapes an expertʼs behavior if an appropriate promise is made and if it is expected to be believed by the consumer; by contrast, the second opportunity might change behavior even though this option is never used along the predicted path. Experimental results confirm the behavioral relevance of (i) but fail to confirm (ii).

Medical Insurance and Free Choice of Physician Shape Patient Overtreatment: A Laboratory Experiment

“…Our experiment is also related to a stream of experimental literature investigating credence goods, in particular Beck et al (2013Beck et al ( , 2014 and Mimra et al (2013Mimra et al ( , 2014. A close match to our study is Dulleck et al (2011).…”

Partner Selection and the Division of Surplus: Evidence from Ultimatum and Dictator Experiments

“…We could not, however, derive any such function for US. We thus find that for UC, hypothesis H3 is rejected, whereas, for DS, it cannot be rejected at the five percent level 13 . Figure 2.…”

“…None of these have allowed for communication. Our article is closer to the nascent line scrutinizing partnership formation and performancein situations where partner selection is on the basis of non-binding communication: see Dulleck, Kerschbamer and Sutter [12], Beck, Kerschbamer, Qiu and Sutter [13], both on credence goods, and Goeree and Zhang [14], who examine principal-agent interactions in hidden information environments 5 .…”

“…Selection function for UC. 13 In the DS regression, 18 observations corresponding to those from round 1 were dropped as they predicted selection perfectly. …”

Separation of prescription and treatment in health care markets: A laboratory experiment

“…Our main results fit consistently into the existing experimental literature on credence goods. The observation that physicians are heterogeneous in their response to overtreatment incentives has also been made in Beck, Kerschbamer, Qiu, and Sutter (2013); Dulleck et al (2011);Gottschalk et al (2017);and Kerschbamer et al (2016), with a particular discussion and estimation of heterogeneity in Kerschbamer et al (2017). Nevertheless, agents respond to incentives.…”